IMF warns of danger of a new global recession in 2012

The International Monetary Fund (IMF) warned of the danger of a new global recession in 2012. According to the latest IMF forecasts, economic growth in Europe will be 2.3% this year rather than the expected 2.4%. Growth in 2012 is predicted at 1.8% due to the uncertainty created by the debt crisis. Portugal and Greece will remain in the grip of recession in 2012 and 2013. GDP in the Eurozone will grow by 1.6% this year, 0.4% down from the previous forecast, slowing down to 1.1% in 2012, compared to the formerly expected 1.7% growth. IMF lowered its growth estimates even for Germany - the engine of the European economy – to 2.7% in 2011, down from the previously forecast 3.2%. Next year, Germany’s economy will slow down its growth to 1.3%, compared to the earlier 2% estimate. Bulgaria’s GDP is expected to increase by 2.5% this year and by 3% in 2012.

“Economic growth in Central and Eastern Europe (CEE) has been affected by the debt crisis in the Eurozone and the global economic slowdown,” said Peter Bretsinshek, Director of Raiffeisen Research, part of Raiffeisen Bank International AG. Therefore, the unit has considerably slashed its forecast for GDP growth in 2012 for most countries in the region to 2.3%. According to Bretsinshek, economic growth in the area will be 3.2% this year. Although GDP growth in the CEE is slowing down, it will remain significantly higher than in the Eurozone, where it is expected to be 1.6% this year and only 0.2% in 2012.

The IMF has also warned that the sovereign debt crisis caused by Greece is escalating into a new banking crisis. Therefore, European banks will have to be recapitalised with some €100-200 bn. “We must quickly restore confidence in the banking system,” IMF Europe Director Antonio Borges warned.

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