Finance & Business World

The International Monetary Fund plans to adjust its global growth forecast to “just below” 3 percent for 2010, a senior economist at the lender said, higher than its prediction in July.

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 today. In July the IMF predicted the world economy would expand 2.5 percent in 2010 after contracting 1.4 percent 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.”

Since the July forecast, data has shown growth returning to the economies of Japan, France and Germany and the Commerce Department reported last week that the U.S. economy shrank less than estimated in the second quarter.

“What needs to happen for this recovery to become self-sustaining is that private demand needs to step in for public demand,” Decressin said.

It will also require a global rebalancing, with an increase in domestic demand from countries with a current- account surplus, he said.

Because it will take time to rebuild activity, the recovery will be “sluggish,” he said.

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