A report released by the International monetary fund (IMF) has said that the global economy is on track for recovery but remains highly vulnerable.
In its half-yearly World economic outlook report it said that the improved financial policies in Europe and an increase in activity in the United States had reduced the chance of a new slow down, But it warns that a disorganised default and exit from one of the embattled Eurozone countries could lead to a full blown panic, damaging the road to recovery severely.
Global growth is expected to drop to 3.5% in 2012 before improving to 4.1% in 2013. The Eurozone is expected to face a mild recession in the coming year with the outlook for Spain being worse than feared.
The WEO said; “Because of the problems in Europe, activity will continue to disappoint in the advanced economies as a group expanding by only about 1.5% in 2012 and by 2% in 2013.
“Job creation in these economies will likely remain sluggish, and the unemployed will need further income support and help with skills, retraining, and job searching.”
The IMF warns that “Austerity alone cannot treat the economic malaise in the major advanced economies.”
It added that “sufficient fiscal consolidation” was taking place in Europe and said plans should be structured “to avoid an excessive decline in demand in the near term.”
In other parts of the world the economies of Canada, Japan and the United States are predicted to see the fastest rate of growth at 2%, with Chinas figures easing from a height of 10.2% to 8.2% over successive years.
In a rather ominous note the report goes on to detail how vulnerable the global economy is to large shocks sighting the situation in Iran and potential hikes in oil prices as a cause of great concern.
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