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India is projected to expand 5.7 percent this year and 6.2 percent in 2014. Three months ago, the IMF had forecast 5.9 percent growth in India this year and 6.3 percent next year. The IMF forecasts were issued before China reported Monday that its growth slowed to 7.7 percent in the first quarter compared with the same period a year earlier. That was down from 7.9 percent in the previous quarter. The growth in the developing world should offset another sluggish year in Europe. The 17-member eurozone, which shrank 0.6 percent in 2012, is expected to continue struggling as governments take steps to reduce their deficits and weak banks reduce lending. The U.S. economy is projected to grow only modestly. Higher taxes and spending cuts will reduce growth by about 1.75 percentage points, according to Olivier Blanchard, the IMF's chief economist. Given that drag, the IMF's 1.9 percent growth forecast for 2013 is better than it looks, he added. "Underlying private demand is actually strong," he said. The IMF's forecast assumes $85 billion in across-the-board spending cuts will be replaced by Sept. 30, the end of the budget year. If they aren't, growth could be 0.2 percentage points lower, the IMF said. The IMF criticized the United States for implementing steep spending cuts without a broader plan for longer-term reductions in deficits. U.S. budget cutting "is too aggressive in the short term and too timid in the medium term. This adds to uncertainty and casts a shadow on the recovery," Lagarde said last week.
The fund sharply boosted its outlook for Japan, projecting 1.6 percent growth this year and 1.4 percent next year. That is 0.4 percentage point and 0.7 percentage point higher, respectively, than in January.
[Associated
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