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IMF sees higher global growth in 2010 but fears stimulus removal

THE International Monetary Fund hiked its global growth expectations for 2010 yesterday, but warned that an early withdrawal of stimulus packages was the biggest downside risk for western economies.

The IMF said world output would expand by 3.9 per cent this year, a significant rise on its forecast of 3.1 per cent in October. Britain’s predicted gross domestic product was revised up from 0.9 per cent to 1.3 per cent, in line with the Treasury’s 1.25 per cent forecast. However, the UK is expected to lag the US at 2.7 per cent and Japan at 1.7 per cent.

The IMF said the global story would be one of increasing divergence between developed economies, which are expected to grow by 2.1 per cent, and emerging markets whose six per cent expansion will be fuelled by burgeoning domestic consumption.

Policymakers in advanced countries will face the challenges posed by high unemployment and huge burdens of public debt, the IMF said.

“Due to the still-fragile nature of the recovery, fiscal policies need to remain supportive... in the near-term,” the report said, although it added: “At the same time, credible strategies for unwinding monetary policy support need to be prepared.”