WASHINGTON – The International Monetary Fund on Tuesday slashed its global economic growth projections for the year, saying the Japanese economy will slow down due to factors such as the planned sales tax hike next April.
In its World Economic Outlook, the IMF also urged the United States to deal with the partial government shutdown and a potential selective default, describing them as “new downside risks” for the global economy.
The IMF projected the global economy will grow 2.9 percent this year in terms of inflation-adjusted gross domestic product, down 0.3 percentage point from the earlier estimate released in July.
The pace of growth for the world economy for 2014 was also revised downward by 0.2 point to 3.6 percent.
As downside risks, the IMF mentioned an unexpected increase in U.S. bond yields following the Federal Reserve’s planned tapering of its quantitative easing measures and prospects that the Chinese economy will grow more slowly than expected.
The IMF trimmed its estimate of Japan’s economic growth for 2013 by 0.1 point to 2.0 percent, while raising the figure for next year by 0.1 point to 1.2 percent.
“Japan’s economy is enjoying a vigorous rebound but will lose steam in 2014 as fiscal policy tightens,” the Washington-based organization said.