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IMF boosts growth forecast for world economy

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The International Monetary Fund today forecast less shrinkage of the global economy this year and boosted its estimate of growth in 2010.

From Reuters in Istanbul, Turkey:

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The IMF declared that a global economic recovery has begun led by Asia, also cautioning that the strength of the rebound depended on a rebalancing of global growth. After a year of being downbeat about prospects for the world economy, the IMF’s latest World Economic Outlook revised up its growth forecasts for this year and next. ‘The recovery has started. Financial markets are healing and in most countries growth will be positive for the rest of the year as well as in 2010,’ the IMF’s chief economist Olivier Blanchard told a news conference here before the start of World Bank and IMF meetings. The Fund now expects world output to contract by 1.1% in 2009 before growing by 3.1% in 2010. This is more upbeat than its last outlook in July when the Fund projected the world economy would shrink 1.4% in 2009, before expanding 2.5% in 2010.

Echoing the theme of last week’s meeting of the Group of 20 heads of state, the IMF said it was crucial for the recovery that debtor nations including the U.S. save more and consume less, while creditor nations (particularly China) ramp up their own spending.

On that test, the U.S. flunked out in August: The government said today that the U.S. savings rate slid to 3% in August from 4% in July as consumer spending rose more than expected.

-- Tom Petruno

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