MaltaToday previous editions

12 BUSINESS & FINANCE maltatoday, WEDNESDAY, 9 OCTOBER 2013 IMF cuts global growth outlook blaming emerging economies The International Monetary Fund (IMF) has trimmed its forecast for global economic growth at the same time as lifting its UK growth projection. It now expects global growth of 2.9% this year, a cut of 0.3% from July's estimate. In 2014 it expects global growth of 3.6%, down 0.2%. It cited weakness in emerging economies for the cut. Olivier Blanchard from the IMF said that a failure to lift the US debt ceiling would lead to "potentially major disruptions". The IMF's upgrades for its outlook on the UK are larger than those it made for any other country in its World Economic Outlook - its twice-yearly assessment of the global economy. It credited recent data indicating higher consumer and business confidence, for the increase. It warned that it would still take years for the UK economy to recover fully from the 2008 financial crisis. It suggested that the government could help boost growth by bringing forward planned public infrastructure spending, such as building new homes. World growth slows Despite the improvement in growth in advanced economies such as the UK and US, the IMF warned that a slower pace of expansion in emerging economies such as Brazil, China and India, was holding back global expansion. It expects growth in Russia, China, India and Mexico to be slower than it forecast in July. In part, it says this is due to expectations of a change in policy by US central bank the Federal Reserve. Simply the expectation that the US could trim back its efforts to stimulate the US economy has already had an impact on interest rates in emerging economies, the IMF said. It said an increasing belief that China's "The IMF said business confidence indicators suggest activity is close to stabilising in peripheral economies, such as Italy and Spain, and already recovering in core economies such as Germany" growth rate would slow would also hit global growth. US fears The IMF expects the US to drive global growth. It warns that the political standoff over raising the US government's borrowing limit, if it results in the US defaulting on its debt payments, "could seriously damage the global economy". It expects growth of 1.6% in the US this year and 2.6% next year, down 0.1% and 0.2% from its July forecast. InWashingtononTuesday,Republicans in Congress and Democratic President Barack Obama remained at an impasse over a shutdown of the US government and legislation to increase the US borrowing limit. President Barack Obama and house speaker John Boehner, leader of opposition Republicans who have demanded major policy concessions from the Democrats in exchange for approving a government budget and allowing debt limit increase, spoke on the telephone on Tuesday but failed to reach a resolution. Boehner's office criticised the president for what it described as his unwillingness to negotiate, while the White House said Obama was happy to negotiate with the Republicans but only after the US government was reopened and the borrowing limit raised. The impasse continued as the US sold one-month bonds at its highest interest rate in five years on Tuesday as investor fears rose over whether the government would reach a deal to avert a default. Eurozone stabilisation Meanwhile, in the euro area, the IMF said business confidence indicators suggest activity is close to stabilising in peripheral economies, such as Italy and Spain, and already recovering in core economies such as Germany. Overall, it predicts growth will fall 0.4% this year, an improvement of 0.1% on its July prediction, and grow 1% next year. "In short, the recovery from the crisis continues, albeit too slowly," said Olivier Blanchard, economic counsellor at the IMF. "The architecture of the financial system is evolving, and its future shape is still unclear. These issues will continue to shape the evolution of the world economy for many years to come." Finance Ministry publishes Auditor General's report on growth forecasts NAO report serves as interim role in place of an independent fiscal institution within the National Audit Office The Finance Ministry yesterday released a report by the National Audit Office which assessed the ministry's macroeconomic forecasts on the Maltese economy. The ministry welcomed the report's conclusion: that it was adopting a correct approach by sticking to the main assumptions of internationally reputable institutions when forecasting during a time of international economic instability. The report was completed and presented to the government at the beginning of September. This evaluation and assessment document was prepared by the NAO, which was tasked by the Minister for Finance to carry out an evaluation and endorsement of the macroeconomic forecasts for the years 2013 and 2014 underpinning government's fiscal plans. This interim decision is in line with the government's plan – as specified in the Report on Effective Actions for Deficit Correction published on the 7 October 2013 – to embed the role of an independent fiscal institution within the National Audit Office, itself an independent institution tasked with the auditing of government finances, and is a body established by the Constitution of the Republic of Malta.

• Cover