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IMF Cites Weak World Economy, Cuts Forecast

A vendor awaits customers in front of cabbages at a wholesale market on the outskirts of Jiaxing, Zhejiang province, in China.
The International Monetary Fund (IMF) says the world economy remains weak and is expected to grow slowly over the next year.

In its new World Economic Outlook report, the IMF forecasts the global economy will expand 3.3 percent this year -- down from an estimated 3.5 percent forecast in July.

The report warns the slump is likely to be prolonged unless policymakers in Europe and the United States take action to deal with their economic ills.

Because of the problems in Europe and the United States, the report says growth in the former Soviet Commonwealth Of Independent States (CIS) is forecast to slow to four percent in 2012.

The report forecasts a 0.4 percent gross domestic product (GDP) decline in the debt-burdened eurozone.

And it says the United States is facing a “fiscal cliff" due to a combination of spending cuts and tax hikes.

The report says leading emerging markets like China, India, Russia, and Brazil will see lower growth because of the slowdown.

The report was released on October 9, ahead of a meeting of the global lender in the Japanese capital, Tokyo.

IMF chief economist Olivier Blanchard says the global economy remains plagued by a weak financial system and troubled banks, as well as a “general feeling of uncertainty” that has contributed to stunted growth since the world financial crisis emerged in 2008.

“Because the world now is so interconnected, what happens in one part of the world has an effect on the rest of the world, and so all these things are combining to slow down growth," Blanchard says in a video released by the IMF.

In the Commonwealth Of Independent States, the report forecasts that growth will slump to 4 percent in 2012, down from a forecast of 4.1 percent in July and down sharply from a 2011 forecast of nearly 5-percent growth.

The report said the region’s three largest economies -- Russia, Kazakhstan, and Ukraine -- have been hit hardest by the European Union debt crisis and a dip in world energy prices.

The IMF forecast says growth in Ukraine will slow to 3 percent this year, and to 3.7 percent in Russia.

The report recommends that the loose grouping of former Soviet states implement structural reforms, strengthen banks and boost fiscal “buffers,” such as stocking government cash reserves, to improve their ability to survive possible future global financial turbulence.

Based on reporting by AP, Reuters, and RFE/RL