US growth to accelerate yet Europe still vulnerable

Julian Harris
Follow Julian
EUROPE needs to strengthen its financial rescue fund to reduce the risk of renewed global instability, the International Monetary Fund (IMF) said yesterday.

But US tax cuts and buoyant emerging economies are helping propel the recovery elsewhere, the IMF said in its world economic outlook, published at the start of the summit in Davos.

The IMF revised up its forecast for US growth to three per cent this year, a sharp increase from the 2.3 per cent forecast in October for the world’s largest economy.

However, it was less positive on other advanced economies, keeping its Eurozone forecast at 1.5 per cent and raising Japan slightly to 1.6 per cent.

“The slow growth prospects of advanced economies and the continued weakness in their fiscal balances have raised the market’s sensitivity to debt sustainability risks,” the IMF said yesterday.

Emerging economies, such as China and India, were expected to keep up brisk growth, although the IMF noted inflation pressures rising, particularly from high food and energy prices.