8 Oct 2014

IMF not banking on pre-2008 growth

5:35 pm on 8 October 2014

The International Monetary Fund has warned that the pace of economic growth may never return to levels experienced before the global financial crisis.

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Photo: 123RF

The Washington-based organisation has cut its forecasts once again, to 3.3 percent this year, and 3.8 percent next year, saying the recovery is weak and uneven.

The IMF said it is unlikely that growth will return to pre-2008 levels, but remained optimistic it would be enough to make sizeable dents in high unemployment worldwide.

New Zealand's fortunes are better than most, with average growth expected to be more than 3 percent over the next couple of years.

IMF chief economist Olivier Blanchard.

IMF chief economist Olivier Blanchard. Photo: AFP

While the picture has improved for the US and Britain, it has worsened for Europe, Brazil, and Russia.

Chief economist Olivier Blanchard said weaker global demand and conflict in parts of the world was keeping growth down.

"What's becoming clearer is even when we all get out of the hole, which I hope we will, potential growth is quite low. The world is not going to go at the same rate as it used to before the crisis."

Economists and Finance Minister Bill English warn that the uncertain global environment is a risk to New Zealand's expansion.

While the dollar has fallen sharply recently, ANZ chief economist Cameron Bagrie said weaker global demand may cap any benefit to exporters.

"One of the reasons the New Zealand dollar is going down is also because there's a little bit more unease about the global scene.

"So yes we're a little bit more competitive but it might be a little bit more difficult to sell our products into the global market."

Mr Bagrie said many governments need to urgently boost infrastructure spending and make the workforce more mobile to avoid another crisis.

Bill English is on his way to Washington for the IMF and World Bank annual meetings later this week and would find out first-hand how difficult things are.

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