IMF sees global economy gaining, US growth slowing

1. Zoom in to Olivier Blanchard, IMF Economic Counsellor and Director of Research Department SOUNDBITE (English) Olivier Blanchard, IMF Economic Counsellor and Director of Research Department "The world economic recovery is proceeding. But it is an unbalanced recovery, it's sluggish in advanced countries, it's much stronger in emerging and developing economies. To understand what's going on, one has to look at the factors behind this recovery. Over the last year or so, the main drivers of the recovery were inventory accumulation and fiscal stimulus. The first one is coming to a natural end and the second one is being slowly phased out." 2. Cutaway media and audience 3. SOUNDBITE (English) Olivier Blanchard, IMF Economic Counsellor and Director of Research Department "Now, in most advanced countries, however, the consumption and parts of investment are still weak and will remain so for some time. By contrast, in most emerging and developing economies, consumption investment are strong and therefore, sustaining growth." 4. Cutaway of the meeting 5. SOUNDBITE (English) Olivier Blanchard, IMF Economic Counsellor and Director of Research Department "The main challenge of advanced countries is fiscal consolidation. But they are going to be reluctant, and maybe in some cases hardly able to achieve it, if growth is weak. They basically need to rely more on exports, for example, in the case of the US. But fiscal consolidation, I think, is the main task of advanced countries. The main task of most emerging market countries, at least all the emerging market surplus countries, is to rebalance. And here again, there are issues of cooperation." 6. Cutaway media and audience 7. SOUNDBITE (English) Olivier Blanchard, IMF Economic Counsellor and Director of Research Department "So we think that the best way to proceed is clearly through cooperation and we think that the G-20 (Group of 20)process and the G-20 members are in a unique position to achieve this cooperation. This is an urgent issue to take up and we hope that they take it to their next meeting." 8. Cutaway of the meeting STORYLINE The global economy will likely strengthen the rest of this year and in 2011 as China and other emerging powers offset weakness in the United States and Europe. That's the latest outlook of the International Monetary Fund, which predicts the world economy will expand 4.8 percent this year and 4.2 percent next year. That would far surpass last year's 0.6 percent decline, the worst since World War II. The IMF's forecast for worldwide growth this year is 0.2 percentage point more than its previous estimate in July. "Now, in most advanced countries, however, the consumption and parts of investment are still weak and will remain so for some time," said Olivier Blanchard, IMF Economic Counsellor and Director of Research Department. "By contrast, in most emerging and developing economies, consumption investment are strong and therefore, sustaining growth." The international lending agency predicts the US economy will grow 2.6 percent this year, below its previous estimate of 3.3 percent, and 2.3 percent next year. The IMF's forecast, released on Wednesday, points to lingering weakness in the United States and Europe after the worst recession since the 1930s Great Depression. The agency says the global economy will require a balancing act: Countries with huge trade and budget deficits such as the United States will need to boost exports. And countries with big trade surpluses such as China must reduce their dependency on exports and boost domestic demand. The forecast was prepared for the annual autumn meetings of the 187-nation IMF and its sister lending organisation, the World Bank. That was the steepest drop since 1946. You can license this story through AP Archive: http://www.aparchive.com/metadata/youtube/69f609972b1f1a7678175465ab21b00f Find out more about AP Archive: http://www.aparchive.com/HowWeWork