In July the IMF had forecasted growth of 0.2% for 2012 and 1.4% growth next year.
The IMF unveiled its latest World Economic Outlook in Tokyo ahead of the IMF-World Bank 2012 annual meetings.
Olivier Blanchard, IMF chief economist, said: “Low growth and uncertainty in advanced economies are affecting emerging market and developing economies through both trade and financial channels, adding to homegrown weaknesses.”
In its report, the IMF stated the “core” economies are expected to see low but positive growth throughout 2012–13. Most euro area “periphery” economies are likely to suffer a sharp contraction in 2012, constrained by tight fiscal policies and financial conditions, and to begin to recover only in 2013.
The news of the downgrade follows UK Chancellor George Osborne’s announcement of a further £10bn worth of cuts to benefits by 2016-17 and plans to impose a limit on the number of children in each family for whom parents can claim child benefit.
This further saving is on top of the £18bn of welfare cuts Osborne announced in 2010. Osborne told Tory party conference delegates yesterday the cuts were necessary because the economy’s "healing is taking longer than we hoped, because the damage was greater than we feared".
