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Tue Jan 24, 2012, 11:37 AM

IMF cuts global growth outlook, cites euro fears


FRANKFURT (MarketWatch) — The International Monetary Fund on Tuesday cut its forecast for global economic growth in 2012 and 2013, citing growing financial strains and rising downside risks as Europe’s debt crisis entered a “perilous new phase.”

n an update of its world economic outlook, the Washington-based institution said it expects global output to grow by 3.3% in 2012, down from 3.8% in 2011 and from a September forecast of 4%. Global output is forecast to expand 3.9% in 2013, down from a previous forecast of 4.5%.

“Global growth prospects dimmed and risks sharply escalated during the fourth quarter of 2011, as the euro-area crisis entered a perilous new phase,” the IMF said.

The IMF said it now expects rising sovereign bond yields and deleveraging by banks to push the euro-zone economy into a “mild recession” in 2012.

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