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IMF warns of slump in growth in India, China, other developing countries | | China, India and other major developing countries have reportedly started
showing signs of declining economic growth in the wake of the Euro crisis and
a sluggish U.S. recovery. According to the International Monetary Fund (IMF),
it highlighted the intensification of concern about the developing world, nations
that had helped prop up global growth but which are now beginning to slow, and
may be nearing crises of their own. The IMF sounded cautious about a situation
where rounds of government stimulus spending and low interest rates have failed
to take hold, and left developing and as well as developed countries saddled with
debt and other problems that give them little room to maneuver if conditions get
worse, the Wall Street Journal reports. Overall, the world economy is still expected
to expand by 3.5 percent in 2012 and 3.9 percent next year, only slightly less
than fund economists had forecasted in April, the report cited. However, the research
found that the trend is in the wrong direction, in which the growth in the first
months of the year was stronger than expected, and the slowdown in developing
countries means the world is losing one of its few economic bright spots. In India
and Brazil , policymakers had complained that a glut of dollars was driving up
the price of the rupee and real, but now the opposite concern has taken hold as
investors pull back in light of the slowdown, while the currencies in those two
countries have dropped sharply in recent months. The IMF said the withdrawal of
money from the developing world has not become critical yet, but the firm is worried
that some of the world's previous star performers could face a quick turnaround
if conditions deteriorate. "If and when a large downside shock ultimately materializes,
these combined vulnerabilities could quickly come to the fore, putting financial
stability to a serious test," the fund concluded.
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