IMF predicted the world economy would expand 2.5% in 2010

The IMF plans to adjust its global growth forecast to "just below" 3% for 2010, a senior economist at the lender said, higher than its prediction in July, Bloomberg reported. The projections haven't been finalized, Jorg Decressin, a division chief in the IMF research department, said on a panel at the Carnegie Endowment for International Peace in Washington yesterday. In July the IMF predicted the world economy would expand 2.5% in 2010 after contracting 1.4% this year. The new forecasts will be released Oct. 1.

"The main risk is that people mistake the recovery we are seeing right now for a self-sustained recovery and withdraw the policy support prematurely," Decressin said, adding that he still sees risks "on the downside." The IMF currently expects the global economy to expand at slightly less than 3% in 2010, said Jorg Decressin, a senior IMF economist, WSJ reported. "The recovery is for real but it is very heavily policy dependent," Mr. Decressin said at a session at the Carnegie Endowment for International Peace. At some point, he said, private demand would have to replace the boost to the global economy from government monetary and fiscal expansion.

The global manufacturing rebound gathered pace in August, a string of closely watched surveys showed yesterday, raising hopes of a sustainable recovery in the world economy, FT reported. The U.S., China, Germany and France reported further strong improvements, adding to evidence of a v-shaped recovery in economic growth in the third quarter. However, some European countries, including U.K., were left behind.

American manufacturing expanded for the first time in 19 months, and pending sales of existing homes rose more than forecast, indicating the worst recession since the 1930s has ended, Bloomberg reported. The Institute of Supply Management's factory index posted its biggest two-month gain since 1983, rising to 52.9 in August; readings higher than 50 signal an expansion. The National Association of Realtors said signed purchase agreements for existing properties jumped 3.2% in July, for a record sixth consecutive gain.

World Bank President Robert Zoellick said the chances of a "truly global recovery" have increased because of China's expansion and improvements in other economies, Bloomberg reported. China's economy is likely to grow by close to 8% this year, topping the institution's most recent estimate, Zoellick said at briefing in Beijing today. Premier Wen Jiabao pledged yesterday at a meeting with the World Bank head to maintain stimulus spending and a "moderately loose" monetary policy, saying the world's third-biggest economy is at a "critical stage."

EU finance ministers were set to agree today that the EU should not be too hasty in withdrawing fiscal stimuli and other extraordinary measures introduced in response to the worst economic crisis in Europe's post-1945 history, the FT reported. "The time has not yet come to withdraw from the fiscal stimulus," said Jean-Claude Juncker, chairman of the 16-member group of euro zone finance ministers. "We have to continue this effort in the course of this year and next year. Then we have to agree on an exit strategy." The EU ministers were arriving in Brussels for an informal lunch meeting aimed at preparing the ground for a two-day session of G-20 finance ministers on Friday and September in London.

The removal of fiscal and monetary policy stimulus provided by governments and central banks around the world to limit the scale and depth of the recession must be coordinated, European Commissioner for Economic and Monetary Affairs Joaquin Almunia said today, DJ reported from Brussels. Almunia was speaking to reporters ahead of a meeting of the Euro Group of finance ministers form the 16 countries that use the euro, and later finance ministers from all 27 European Union members.