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Risks to world recovery have 'risen sharply'

By Grace Wong, contributing writer


LONDON (CNNMoney.com) -- The global economy grew at a stronger-than-expected pace in the first six months of the year, but the risks to recovery have greatly increased, according to the International Monetary Fund.

In an update of its World Economic Outlook, released Wednesday, the IMF raised its growth forecast for 2010 to 4.6% from the 4.2% estimate it made in April.

However, the international organization warned that the risks to recovery have "risen sharply" due to renewed financial turbulence.

It left its 2011 forecast for world growth unchanged at 4.3%.

The IMF said world economic growth exceeded forecasts in the first half of the year, largely driven by expansion in Asia.

But looking ahead, it offered a more dour view.

It cautioned that "recent turbulence in financial markets - reflecting a drop in confidence about fiscal sustainability, policy response, and future growth prospects - has cast a cloud over the outlook."

For 2011, the IMF sees cooling growth in China to 9.6% from 10.5% this year.

In the United States, it predicts growth will slow to 2.9% next year from 3.3% in 2010.

It forecasts a slight improvement, though, in Europe. The IMF expects the euro area economy to grow 1.3% next year after expanding a mere 1% this year. To top of page

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