IMF’s Revised GDP Forecast: Down, But Not Out

The IMF cut its forecast for global economic growth today, albeit slightly. The organization expects global GDP to rise this year by 4.3%, down from its previous 4.4% estimate. “The global economy, hit by slowdowns in Japan and the United States, is expected to reaccelerate in the second half of the year, but growth remains unbalanced and concerted policy action by major economies is needed to avoid lurking dangers,” the IMF advises.

For the U.S., the new prediction calls for a 2.5% rise, down from a 2.8% forecast in April. That’s more or less what I’ve been expecting, which is to say growth of some degree. Not great, but enough to keep the macro demons at bay. Next week’s economic data updates may change my view, but as I’ve been discussing this week, the numbers for the U.S. still fall short of risking a new recession. The argument that’s it’s soft patch still look more compelling, if only moderately. Apparently the IMF agrees.
But there may be a joker in this deck, the IMF notes. As The Telegraph reports:

The IMF added that a lack of political leadership in dealing with the debt crisis and the budget showdown in the United States could create major financial volatility in coming months.

“You cannot afford to have a world economy where these important decisions are postponed because you’re really playing with fire,” said Jose Vinals, director of the IMF’s monetary and capital markets department.