IMF cuts forecast for global growth The International Monetary Fund has cut its forecast for global growth in 2012, highlighting the slowdown that has spread around the world in the past few months. In an update to its regular World Economic Outlook, the Fund cut its 2012 growth forecast from 3.6 to 3.5 per cent and its 2013 forecast from 4.1 to 3.9 per cent. "The global recovery continues, but it is a weak recovery, and indeed a bit weaker than we forecast last April," said Olivier Blanchard, head of the IMF's research department. The revisions show how the latest round of turmoil in the eurozone, combined with a slowdown in large emerging markets, is threatening a global economy that still has not fully recovered from the financial crisis. The IMF warned that even those forecasts relied on two important assumptions: enough policy action to ease financial conditions in the eurozone and some effective easing in emerging markets. "More worrisome than these revisions to the baseline forecast is the increase in downside risks," warned Mr Blanchard, pointing to the eurozone. The Fund said the "utmost priority" was to resolve the crisis in the eurozone, but also warned about the risk of "excessive fiscal tightening" in the US, where fiscal policy will take 4 percentage points of demand out of the economy at the end of the year unless planned policy actions are altered. Outside the eurozone, the IMF appeared to endorse further monetary easing by central banks such as the US Federal Reserve and the Bank of England. "In other major advanced economies, monetary policy also needs to respond effectively, including with further unconventional measures, to a much weaker near-term environment that will dampen price pressures," it said. The Fund also warned, in an update to its separate review of financial stability, of increasing risks to the global system. "Financial stability risks have increased, because of escalating funding and market pressures and a weakening growth outlook," said José Viñals, head of the IMF's Monetary and Capital Markets Department. Mr Viñals called on the eurozone to take immediate action to strengthen sovereign and government balance sheets. "Monetary policy has bought valuable time, but time needs to be used well by political leaders to make progress now," he said.