London/Beijing: The International Monetary Fund (IMF) has revised its 2010 growth forecast sharply upwards, a source said on Thursday.
But underscoring the unclear outlook, World Bank President Robert Zoellick said the global economy is set to contract by close to 3% this year, worse than the previous estimate of a decline of 1.75%.
“Although growth is expected to revive during the course of 2010, the pace of the recovery is uncertain and the poor in many developing countries will continue to be buffeted by the aftershocks,” Zoellick said ahead of the Group of Eight finance ministers meeting in Italy.
The IMF has raised global growth estimates for 2010 to 2.4% from 1.9% in April, a G8 source who has seen the latest figures said on condition of anonymity.
“The estimate has improved thanks to the impact of stimulus measures taken in recent months,” said the source, who had access to an IMF briefing note, containing the figures, prepared for finance ministers from the Group of Eight (G8) industrial powers who are meeting in Italy this weekend.
Global data has given increasing signals of a rebound from the deepest recession in six decades, driving stock markets sharply higher from a March trough.
However, financial markets remain concerned that huge government spending and central bank cash injections, led by the US but mirrored in Europe and Japan, will spark inflation and undercut any nascent rebound.
A record slump in Japan’s first quarter gross domestic product nevertheless reinforced expectations that any rebound would be slow, and European officials said jobs would lag any return to growth.
“The (global) economy should start to turn into positive territory somewhere between the end of this year and the middle of next year,” European Central Bank (ECB) policymaker Christian Noyer told Hong Kong businessmen on Thursday.
Noyer said rising unemployment could still hurt consumption and growth prospects. German deputy finance minister Joerg Asmussen echoed the jobs warning, even as he confirmed he saw Germany returning to growth of 0.5% in 2010.
“You can say that there are first signs of a stabilization in the world economy,” Asmussen told reporters. “But the timing and speed of a recovery are uncertain.”
In signs of revival in the world’s largest economy, US May retail sales rose 0.5%, in line with forecasts, compared with a 0.2% drop in April, and jobless claims also fell in the latest week, official data showed.
Markets also awaited a 30-year US treasury auction, after a disappointing Wednesday sale pushed yields on the benchmark 10-year treasury note above 4% for the first time in eight months.
That suggests it will cost the US government more to finance its growing budget deficit.
“The risk of rising yields should not be discounted,” said Joseph Brusuelas of Moody’s Economy.com. “If continued, they will reduce home mortgage refinancing and curtail corporate borrowing, both critical to an economic recovery.”