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IMF: Chinese economy to grow 10% in 2010

The International Monetary Fund (IMF) said Tuesday the global economy is recovering faster than previously anticipated and will grow 3.9 percent this year and 4.3 percent in 2011.

China, the largest emerging economy, will expand 10.0 percent this year and 9.7 percent next year, much better than previous forecasts.

And India is expected to expand 7.7 percent this year and 7.8 percent next.

The IMF said it had revised upwards its earlier forecast for global growth by 0.75 percentage point from the October 2009 forecast.

But the recovery is proceeding at different speeds around the world, with emerging markets, led by Asia relatively vigorous, but advanced economies remaining sluggish and still dependent on government stimulus measures, the IMF said in an update to its World Economic Outlook.

According to the update, output in the advanced economies is now expected to expand by 2 percent in 2010, following a sharp decline in output in 2009.

In 2011, growth is projected to edge up further to 2.5 percent.

Among advanced economy forecasts, growth in the United States, the world's largest economy, will reach 2.7 percent this year, a sharp 1.2 percent increase from the prior forecast.

The euro are is expected to grow 1 percent this year and 1.6 percent in 2011, while Japan is seen expanding 1.7 percent this year and 2.2 next.

"In spite of the revision, the recovery in advanced economies is still expected to be weak by historical standards, with real output remaining below its pre-crisis level until late 2011," said the report.

Moreover, high unemployment rates and public debt, as well as not-fully-healed financial systems, and in some countries, weak household balance sheets are presenting further challenges to the recovery in these economies.

Growth in emerging and developing economies is expected to accelerate to about 6 percent in 2010, following a modest 2 percent in 2009, said the IMF in the update.

"In 2011, output is projected to accelerate further," it said, noting that stronger economic frameworks and swift policy responses have helped many emerging economies to cushion the impact of the unprecedented external shock and quickly re-attract capital flows.

But the IMF also stressed that within both groups, growth performance is expected to vary considerably across countries and regions, reflecting different initial conditions, external shocks, and policy responses.

"For instance, key emerging economies in Asia are leading the global recovery," said the IMF in the update. "A few advanced European economies and a number of economies in central and eastern Europe and the Commonwealth of Independent States are lagging behind."

Meanwhile, the rebound of commodity prices is helping support growth in commodity producers in all regions, and many developing countries in sub-Saharan Africa that experienced only a mild slowdown in 2009 are well placed to recover in 2010.

"For the moment, the recovery is very much based on policy decisions and policy actions," said IMF Chief Economist Olivier Blanchard in an IMF video interview. "The question is when does private demand come and take over. Right now it's ok, but a year down the line, it will be a big question."

IMF Managing Director Dominique Strauss-Kahn has warned that countries risk a return to recession if anti-crisis measures are withdrawn too soon.

Moreover, the IMF also warned financial conditions have improved further but remain challenging.

"Financial markets have recovered faster than expected, helped by strengthening activity. Nevertheless, financial conditions are likely to remain more difficult than before the crisis," it said.

Crucially, there remains a pressing need to continue repairing the financial sector in advanced and hardest-hit emerging economies.

In these cases, policies are still needed to tackle bank's impaired assets and restructuring, said the IMF, also urging policymakers to move boldly to reform the financial sector to reduce the risks of future instability.

(Xinhua, January 27, 2010)

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