* IMF predicts weak growth in 2013, rebound next year
* IMF warns downside risks still significant
* Activity in advanced economies still weak
* Fund sees some pick up in emerging economies
By Lesley Wroughton
WASHINGTON, Jan 23 An unexpectedly stubborn euro
zone recession and weakness in Japan will weigh on global
economic growth this year before a rebound in 2014 that should
deliver the fastest expansion since 2010, the International
Monetary Fund said on Wednesday.
The IMF trimmed its 2013 forecast for global growth to 3.5
percent from the 3.6 percent it projected in October, but said
it looked for a 4.1 percent expansion in 2014 if a recovery
takes a firm hold in the euro zone. It said the world economy
grew 3.2 percent last year.
Healthy global growth rates of above of above 4 percent were
last seen in 2010, when output expanded 5.1 percent as the
global financial crisis eased.
The IMF said activity in advanced economies would likely
remain weak this year with growth of just 1.4 percent before
strengthening to 2.2 percent in 2014. In October, it projected
developed economies would expand 1.5 percent in 2013.
"Policy actions have lowered acute risks in the euro area
and the United States," the IMF said in an update of its World
Economic Outlook. "However, downside risks remain significant,
including renewed setbacks in the euro area and risks of
excessive near-term fiscal consolidation in the United States."
The United States is due to run out of room under a
self-imposed borrowing limit of $16.4 trillion sometime between
mid-February and early March.
Republicans, who want to use the need to raise the debt
ceiling as leverage to exact deep spending cuts, have signaled a
willingness to pass a nearly four-month extension of the debt
limit, defusing immediate fears of a damaging U.S. debt default
but keeping a longer-term threat alive.
The IMF said the U.S. economy was set to expand 2 percent
this year, with growth rising above trend in the second half of
this year and reaching 3 percent in 2014.
"The priority is to avoid excessive fiscal consolidation in
the short term, promptly raising the debt ceiling, and agree on
a credible medium-term fiscal consolidation plan, focused on
entitlement and tax reform," it said.
POLICY CHALLENGES FOR EUROPE, JAPAN
The IMF said a prolonged stagnation in the euro zone is a
threat especially if the currency bloc fails to complete fiscal
and banking reforms.
The IMF said Japan's economy is likely to manage 1.2 percent
growth this year, helped by fiscal stimulus, an easing of
monetary policy and a weaker yen, But it warned that growth was
likely to slow to 0.7 percent in 2014.
It urged Tokyo to adopt a more ambitious easing of monetary
policy and a "credible" medium-term plan to tighten its budget.
Meanwhile, growth in emerging and developing economies
should strengthen to 5.5 percent this year and 5.9 percent in
2014, the IMF said, adding that supportive policies had helped
boost growth although weak demand from trading partners would
still be a problem.
The pace of growth in China was set to increase to 8.2
percent this year and 8.5 percent in 2014, up from 2012 but
still lower than the 10 percent growth rates of 2010, the fund
Developing Asia, including China and India, will remain the
fastest-growing region in the world, according to IMF forecast,
with growth of 7.1 percent this year and 7.5 percent in 2014.
Africa, with growth likely around 5.8 percent this year and
5.7 percent next year, is the world's second-fastest growing.