IMF offers bleak assessment of recovery

Among the 17 nations that use the euro, low growth in the major "core economies," such as Germany and France, will be offset by outright contractions in the smaller economies, leading real gross domestic product to fall by about 0.4 percent in 2012, the IMF said.

It forecasts growth in the euro area will stay flat in the first half of 2013 and tick up to about 1 percent in the second half of the year, the IMF said.

The report was released just ahead of the World Bank-IMF annual meeting, which is being held in Tokyo this week. The gathering of some 10,000 bankers, executives and officials will likely refocus attention on Japan's failure to escape its own economic slump two decades after its own financial implosion in the early 1990s.

The IMF said it expects growth in Japan to hit 2.2 percent this year but to slacken further as reconstruction from the March 2011 disasters winds down, falling to 1.2 percent in 2013.

Japan, whose population is both shrinking and aging faster than elsewhere, is confronting problems of high debt and stagnation, it said.

As usual, the bright spots are developing economies that were less affected by the global financial crisis, where rising employment and strong demand will help support growth, the IMF said.

China's economy will likely expand 7.8 percent this year, down from July's 8 percent forecast, though a pickup in construction projects is expected to spur growth late in the year. India's economy will grow 4.9 percent, down from 6.1 percent. And Brazil's growth will be only 1.5 percent, compared to 2.5 percent.

The IMF advised policymakers to devise stronger medium-term fiscal and structural reforms to shore up confidence in the growth potential of the advanced economies.

Only then, will investor confidence in markets and public debt be restored.

"Unless governments spell out how they intend to effect the necessary adjustment over the medium term, a cloud of uncertainty will continue to hang over the international economy, with downside risks for output and employment in the short term," it said.