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Europe's economy is also benefiting as government spending cuts and tax increases ease. The IMF forecasts the 17 nations that use the euro currency will expand 1 percent in 2014, after shrinking 0.4 percent this year. Those estimates are mostly unchanged from July. Many developing countries, particularly India, have been hurt by expectations that the Federal Reserve will soon slow its $85-billion-a-month in bond purchases. That's caused investors to pull money from India, Brazil and other emerging markets as yields on U.S. assets picked up. The fund slashed its forecast for India's growth 1.8 percentage points to 3.8 percent this year and 1.1 percentage points to 5.1 percent in 2014. It projects that Brazil's economy will expand 2.5 percent this year, the same forecast as July. But it no longer expects growth to accelerate in 2014. It now expects 2.5 percent growth next year, or 0.7 percentage point lower than its previous forecast. India's central bank has raised interest rates in an effort to stem the flow of money leaving the country, a move that has also slowed growth. Brazil's economy has been hampered by poor infrastructure and high inflation. That has forced its central bank to also raise interest rates.. The IMF called on the Fed to clearly communicate its plans as it moves toward scaling back the bond purchases. But at the same time, it said the Fed should continue its efforts to stimulate the economy. "It is time to make plans to exit (bond purchases) and zero interest rates, though it is not yet time to implement those plans," Blanchard said.
[Associated
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