IMF Sounds a Sour Note on World Economy; Citing Uncertainty, Report Predicts Global Growth Will Slow Further over the Next Year; BUSINESS

Article excerpt

Plagued by uncertainty and fresh setbacks, the world economy has weakened further and will grow more slowly over the next year, the International Monetary Fund says in its latest forecast.

Advanced economies are risking recession, the international lending group said in a quarterly update of its World Economic Outlook, and the malaise is spreading to more dynamic emerging economies such as China.

The IMF forecasts that the world economy will expand 3.3 percent this year, down from the estimate of 3.5 percent growth it issued in July. Its forecast for growth in 2013 is 3.6 percent, down from 3.9 percent three months ago and 4.1 percent in April.

Markets fell on the news. The Dow Jones industrial average declined 110.12 points, or 0.8 percent, to 13,473.53. The Standard & Poor's 500 index dropped 14.40 points, a hair under 1 percent, to 1,441.48. The Nasdaq composite index lost 47.33 points, or 1.5 percent, to 3,065.02.

The slide came on the five-year anniversary of record high closes for the Dow and S&P 500. The Dow is about 700 points off its all- time high, 14,164.53.

Underpinning that bleaker scenario are the assumptions that Europe will continue to ease monetary policy and that the U.S. will avert a crushing blow to growth by fending off a so-called "fiscal cliff" that could result from a failure to reach a compromise on its budget law and tax cuts.

Conditions could worsen if the United States doesn't deal with its budget crisis soon, the IMF said.

"Downside risks have increased and are considerable," the IMF said. It said its forecasts are based "on critical policy action in the euro area and the United States, and it is very difficult to estimate the probability" that action will be taken.

The IMF has urged the U. …