IMF projects Japanese economy to contract slightly in 2011

The International Monetary Fund (IMF) projected on Wednesday that Japanese economy will shrink to negative growth in 2011 mainly due to the impact of the earthquake and tsunami disasters earlier this year.


"Japan's huge earthquake and devastating tsunami last March have taken a heavy toll on the country's economy, and even though output will revive in the second half of the year as reconstruction takes hold, the IMF projects overall growth for the year will fall to -0.7 percent this year," the Washington-based international financial institution said in its annual report on the Japanese economy.


The IMF said that the recovery is projected to continue in 2012, supported by exports and continued public spending. On this basis, the IMF expects the country's GDP growth to rise to a positive 2.9 percent in 2012.


The IMF expects economic activity in Japan to bounce back from the twin disasters starting in midyear, as supply constraints ease and reconstruction spending accelerates.


The Great East Japan earthquake and tsunami, in which 24,000 people died and thousands of homes were destroyed, created problems with electricity supply and severe manufacturing bottlenecks that also affected countries around the world.


The 187-member international institution noted that the Japanese government's fiscal response to the disasters has been appropriately focused on relief and reconstruction efforts. At the same time, early and credible action is essential to secure the long-term health of Japan's public finance, it added.


The IMF warned that "a failure to bring about needed fiscal adjustment would affect growth prospects in Japan and overseas if it resulted in a sharp rise in government bond yields."
(Source:http://news.xinhuanet.com)