IMF give a state of the world economy assessment

1. Wide of International Monetary Fund (IMF) World Economic Study team members walking into news briefing 2. Cutaway of audience members 3. SOUNDBITE (English) Olivier Blanchard, Chief Economist, IMF: "The global economy has entered a dangerous new phase. The recovery has weakened considerably and downside risks have increased sharply. Strong policies are needed both to improve the outlook and reduce the risks." 4. Cutaway of audience 5. SOUNDBITE (English) Olivier Blanchard, Chief Economist, IMF: "What has happened is that markets have become more sceptical about the ability of policymakers of governments to stabilise their public debt. Worries have spread from countries at the periphery of Europe to countries in the core of Europe, and then to others: Japan, even the United States." 6. Cutaway of audience and media 7. Wide of panel 8. SOUNDBITE (English) Olivier Blanchard, Chief Economist, IMF: "Worries about sovereigns have translated into worries about the banks holding these sovereign bonds, mainly in Europe. These worries have led to a partial freeze of financial relations with banks keeping high levels of liquidity and tightening lending. Fear of the unknown is very high. Stock prices have fallen. These will adversely affect spending and growth in the months to come." 9. Wide of briefing STORYLINE: The world economy has entered a "dangerous new phase", the chief economist of the International Monetary Fund (IMF) said on Tuesday. As a result, the international lending organisation has sharply downgraded its economic outlook for the United States and Europe through the end of next year. The IMF expects the American economy to grow just 1.5 percent this year and 1.8 percent in 2012. That''s down from its June forecast of 2.5 percent in 2011 and 2.7 percent next year. "The global economy has entered a dangerous new phase," said Olivier Blanchard, the IMF''s chief economist, at a news briefing in Washington on Tuesday. "The recovery has weakened considerably. Strong policies are needed to improve the outlook and reduce the risks." The IMF has also lowered its outlook for the 17 countries that use the euro. It predicts 1.6 percent growth this year and 1.1 percent next year, down from its June projections of 2 percent and 1.7 percent, respectively. The gloomier forecast for Europe is based on worries that euro nations won''t be able to contain their debt crisis and keep it from destabilising the region. "Markets have clearly become more sceptical about the ability of many countries to stabilise their public debt," Blanchard said. Overall, the IMF predicts global growth of 4 percent for both years. Stronger growth in China, India, Brazil and other developing countries should offset weaker output in the US and Europe. Financial turmoil and slow growth are feeding on each other in both the US and Europe, IMF officials say. "Worries about sovereigns have translated into worries about the banks holding these sovereign bonds, mainly in Europe," Blanchard said. "These worries have led to a partial freeze of financial relations with banks keeping high levels of liquidity and tightening lending." "Fear of the unknown is very high," he added. "Stock prices have fallen. These will adversely affect spending and growth in the months to come." Sharp stock market drops in the US over the summer have hurt consumer and business confidence and will likely reduce spending. That slows growth, which leads many investors to shift money out of stocks and into safer investments, such as Treasury bonds. In Europe, slower growth will make it harder for stressed nations to get their debt under control. US and European policymakers must act more decisively to cut budget deficits, the IMF said. You can license this story through AP Archive: http://www.aparchive.com/metadata/youtube/06262904e35ba9bbb6430a36496d124b Find out more about AP Archive: http://www.aparchive.com/HowWeWork