What was once a "two speed recovery" is now looking like a "three speed recovery" to IMF researchers. It had been the case that advanced economies were recovering at a slower rate than emerging and developing economies. Now, there is a split among advanced economies. Overall, the IMF is projecting 3.25% growth in global gdp for 2013 and 4% growth in 2014. That is up from 2.75% growth over the second half of last year. Here are some regional specific projections from the World Economic Outlook : In advanced economies, the recovery will continue to proceed at different speeds. The main revision relates to the U.S. budget sequester, which lowers the U.S. growth forecast for 2013. Following a disappointing end to 2012, easier financial conditions, accommodative monetary policies, recovering confidence, and special factors will support a reacceleration of activity, notwithstanding still-tight fiscal policy in the United States and the euro area. The reacceleration, which assumes that policymakers avoid new setbacks and deliver on their commitments, will become apparent in the second half of 2013, when real GDP growth is forecast to again surpass 2 percent. • Thanks to increasingly robust private demand, real GDP growth in the United States is forecast to reach about 2 percent in 2013, despite a major fiscal tightening, and accelerate to 3 percent in 2014. Weak growth in the United States in the fourth quarter of 2012 reflected the unwinding of a spurt of inventory investment and defense spending during the third quarter (Figure 1.8, panel 1). Preliminary indicators suggest that private demand remained resilient this year, but across-the-board public spending cuts are expected to take a toll on the recovery going forward. • Activity in the euro area will pick up very gradually, helped by appreciably less fiscal drag and some easing of lending conditions. However, output will remain subdued––contracting by about ¼ percent in 2013––because of continued fiscal adjustment, financial fragmentation, and ongoing balance sheet adjustments in the periphery economies (Figure 1.8, panel 2). The projection assumes that policy uncertainty does not escalate and further progress is made toward advancing national adjustment and building a strong economic and monetary union. • Activity in Japan is expected to accelerate sharply during the first quarter of 2013, as the economy receives a lift from the recent fiscal stimulus, a weaker yen, and stronger external demand. Growth will reach 1½ percent in 2013, according to WEO projections, and will soften only slightly in 2014 as private demand continues to garner speed, helped by aggressive new monetary easing offset by the winding down of the stimulus and the consumption tax increase. In emerging market and developing economies, the expansion of output is expected to become broad based and to accelerate steadily, from 5 percent in the first half of 2012 to close to 6 percent by 2014. The drivers are easy macroeconomic conditions and recovering demand from the advanced economies. Download the full report here .
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