IMF to Make ‘Substantial’ Cut in Global Economic Forecast, Blanchard Says

By Vincent Del Giudice and Michael McKee - Jan 7, 2012 6:20 AM GMT+0700

The International Monetary Fund will make a “fairly substantial” cut to its forecast for global economic growth this year, Olivier Blanchard, the IMF’s chief economist, said today.

“I can’t give you a number,” Blanchard said in an interview on Bloomberg Television from a conference in Chicago. “It’s going to be substantial.”

In September, the Washington-based fund lowered its forecast for global growth to 4 percent in 2012 and warned of “severe” repercussions if Europe failed to contain its sovereign debt crisis.

Overall world growth will probably be “not very far” from 3 percent to 4 percent, he said, adding Europe is “very close to zero at this point” while the U.S. is in better shape than many other nations.

A government report today in Washington showed the unemployment rate in the U.S. declined in December to 8.5 percent, the lowest in almost three years.

Blanchard’s comments about revisions to the global outlook are stronger than those made today by his chief, IMF Managing Director Christine Lagarde, on a visit to Pretoria, South Africa.

The fund will publish revised forecasts on Jan. 24 or Jan. 25 that are “consistent with reality,” Lagarde told reporters. “We should all be prepared for a 2012 that will not be a walk in the park.”

To contact the reporters on this story: Vincent Del Giudice in Washington at vdelgiudice@bloomberg.net; Michael McKee in New York at mmckee@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net