The IMF in its latest World Economic Outlook, has forecasted a growth of 4% for the global economy in the year 2011 and 2012 cutting down growth projections for all the economies, on rising risks. The IMF had previously projected a growth of 4.3% in 2011 and 4.5% in 2011 in its June Outlook.

The IMF's Chief Economist, Mr Olivier Blanchard singled out Europe as the major source of  worry and said that the policy makers are one step behind the market and Europe needs to "get its act together" and deal with its worsening sovereign debt crisis.

The Key takeaways from the 241 page report titled  "Slowing Growth, Rising Risks" are as under :

• Risks are clearly on the downside because of the following four reasons 1) weak sovereign and banks in number of advanced economies 2) lack of strong policies to address the legacy of the crisis in major advanced economies 3) vulnerabilities in the number of emerging market economies and 4) volatile commodity prices and geopolitical tensions

• The report warned that US and the European nations may face recession unless the global governments take concerted action to revamp the policies.

• More Financial repair is essential as to injecting new capital and restructuring weak but viable banks, while closing others and repairing wholesale funding markets.

• There are signs of Economic slack alongside signs of Overheating - The continued expansion in the global economy has come with increasingly cyclical diversity. The advanced economies have excess capacities and there are signs of overheating in the emerging economies.

• Putting the brakes on the overheating economies - The emerging economies have implemented policy hikes or other measures to reduce credit growth, bearing some exceptions the overheating signals are still flashing yellow rather than red. Vulnerabilities related to strong credit expansion and in some cases buoyant domestic demand is a concern

• Estimates obtained from Global projection Model point to the need for further policy rate hikes in Latin America and emerging Asia. Emerging Asian countries should adopt other measures to tighten monetary conditions, such as controls on credit growth. The economies like Argentina, India, Russia and Turkey require more tightening measures as per the Simple Taylor rule.

• Underlying Inflation pressure remains elevated in emerging and developing economies. The Headline or core inflation has been on a rise in emerging economies and factors like food & energy prices and policy of the central bankers will determine its future path.

• Inflation in some economies like Argentina, India, Paraguay, Venezuela and Vietnam were seen as noticeably higher than their regional peers.

The report also cautioned that hasty budget cuts in the United States could further weaken the US growth and the US Federal Reserve should be prepared to ease monetary policy further. The Fed is meeting on 21st and 22nd of September and is widely expected to take fresh steps to boost the growth in the US economy