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IMF: U.S. GROWTH AHEAD OF WORLD

The monetary fund says the rest of the world risks remaining sluggish.

New York Times

WASHINGTON - The International Monetary Fund cut its forecast for world growth Tuesday, warning that stagnation in Europe, a slowdown in large emerging markets and heightened political tensions in Russia and the Middle East threaten an increasingly fragile global economy.

At a news conference starting its semiannual meeting, an event that attracts financiers, policymakers and central bankers from around the world, the IMF's top economists highlighted a tepid economic recovery in which major nations have failed to keep up with the United States.

The fund brought its estimate for global growth down to 3.3 percent from 3.7 percent, and reduced its forecast for 2015 to 3.8 percent. The fund pointed to weaker growth in China, Europe, Japan and Latin America (Brazil, in particular) as the main culprits behind the broad retrenchment.

By contrast, the outlook for the U.S. economy, fresh off its strong jobs report last week, was revised sharply upward, to 2.2 percent this year from 1.7 percent.

In an interview Friday, Christine Lagarde, the IMF's managing director, said global growth risked being stuck in a rut for a long time. "If nothing gets done in a bold way, there is a risk of new mediocre" level of growth for the global economy, she said. "And that's particularly clear now, because growth potential has already gone down."

Numerous countries, especially in Europe, have still not shed problems from the financial crisis and continue to face high government and household debt, as well as persistent unemployment, Lagarde said. In addition, divergent monetary policies between the United States and Europe appeared likely to perpetuate a growth gap on both sides of the Atlantic, in which the U.S. economy forged ahead while much of the Continent lagged behind.

The fund's estimate for U.S. growth in 2015, 3.1 percent, outpaces all major industrialized countries and beats out a number of emerging markets as well.

Economists have been warning for some time that a situation in which America becomes the engine for the global economy brings with it significant risks in terms of creating financial uncertainty in emerging markets as currencies weaken and capital flows reverse.

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