Global recovery still under threat, says IMF

The global economic recovery is still at risk, and eurozone economies remain in a "precarious" situation, the International Monetary Fund has said.

A delayed or insufficient response from European leaders to the crisis would further derail the recovery, it said.

The IMF downgraded its forecast for global growth for 2013 to 3.9% from the 4.1% prediction it made in April.

One of the biggest downward revisions was to the UK, now expected to grow by 1.4% in 2013. In April it predicted 2%.

The forecast for growth in 2012 was also reduced for the UK, down to 0.2% from the 0.8% cited in April.

The IMF's prediction for world output this year - as measured by gross domestic product - was little changed at 3.5%.

In its updated World Economic Outlook, which is published twice each year, the Washington-based lender said: "Downside risks continue to loom large, importantly reflecting risks of delayed or insufficient policy action."'Precarious situation'

The euro area will remain in a "precarious" situation unless leaders take further action to avoid the sovereign debt crisis from escalating and prevent a market meltdown, the report said.

"The utmost priority is to resolve the crisis in the euro area," said the report.

The 17-member eurozone economy is expected to contract by 0.3% this year before rebounding by 0.7% next year.

The IMF, along with the European Central Bank (ECB) and the European Union, has demanded austerity measures in the struggling periphery economies of Greece, Spain and Portugal in return for bailouts.

The crisis has led millions of people to lose their jobs and benefits. There were also concerns that runs on bank deposits would trigger a eurozone-wide bank run and banking crisis.

Europe must be committed towards forging a "complete" monetary integration by pursuing a banking and fiscal union, said the IMF.

BBC