Global Economy Reviews

09.09.2009 13:37 World Economy Review - August 2009

The International Monetary Fund has revised up its forecast for economic growth this year and next in major industrialized economies and worldwide. The IMF now forecasts the world economy will shrink by 1.3% in 2009, a shade less than its earlier forecast of 1.4% contraction, before growing by 2.9% in 2010, revised up from the 2.5% it expected in April. The figures, which had been due to be published next week, support comments made by Mr Dominique Strauss Kahn MD of IMF, when he said that economic recovery would be sluggish and warned against unwinding recent economic stimulus packages too quickly. For advanced economies, the IMF predicted 3.7% contraction this year, slightly less than the 3.8% previously forecast, and then growth of 1% in 2010, up from an earlier 0.6%. The forecasts are broadly in line with revised forecasts for the second half of 2009 released by the Organization for Economic Cooperation and Development.
The IMF upgraded its 2009 forecasts for the United States, euro zone, Japan and Germany, with its estimated contraction reduced to 5.3% from 6.2%. But it worsened its 2009 outlook for Britain, seeing 4.5% contraction instead of 4.2%. For 2010, forecasts for all the above economies were revised up, with the exception of Japan`s growth, which was left unchanged at 1.7%. The IMF is questioning whether the world`s economic recovery is sustainable. Olivier Blanchard, the director of the research department at the IMF, says that rapidly increasing debt on top of already large fiscal deficits could stall the nascent recovery.
The start of a muted recovery was confirmed by the Organization for Economic Cooperation and Development (OECD) today with an estimate that the GDP of the OECD area has stabilised. Following a fall of 2.1% in the previous quarter, developed countries GDP fell by 0.002% over the second-quarter.
GDP for the seven largest developed countries fell by 0.1%. However, the rate masks considerable variations between different countries, from a 0.9% increase in Japan to a 0.8% decline in Britain. America`s GDP fell by 0.3%, adding to hopes that it is about to escape recession, while France and Germany recorded positive growth rates of 0.3%.

full version...

10.08.2009 20:42 World Economy Review - July 2009

The World Economic Outlook (WEO) of the International Monetary Fund (IMF), July edition, notes that the global economy is beginning to pull out of recession unprecedented since World War II, but stabilization is uneven and the recovery is expected to be sluggish. Accordingly, global activity is forecast to fall by 1.4% in 2009, but to expand by 2.5% in 2010, which is 0.6% higher than envisaged in the April 2009 WEO. The higher annual average growth rate for 2010 largely reflects carryover from a markup in growth during the final half of 2009. On a Q4 to Q4 basis, real GDP growth is projected at 2.9% in 2010, compared with 2.6% in the April 2009 WEO forecast. Accordingly, GDP in the advanced economies is projected to decline by 3.8% in 2009 before growing by 0.6% in 2010.
Growth projections in emerging Asia have been revised upward to 5.5% in 2009 and 7% in 2010. Growth projections for emerging Africa and the Middle East have been revised downward by 0.3% and 0.5% in 2009, respectively, while those for 2010 are broadly unchanged.
The IMF, in its annual report on the U.S. economy, stuck to earlier forecasts that gross domestic product will shrink by 2.6 percent in 2009 and then rise by 0.8 percent in 2010. The report was prepared before U.S. data showed the economy contracted by a 1.0 percent annual rate in the second quarter. "As a result of their increasingly strong and comprehensive policy measures, the sharp fall in economic output seems to be ending, and confidence in financial stability has strengthened," the IMF said in its report, which followed consultations with U.S. officials and institutions. "Nevertheless, with financial strains still elevated, the recovery is likely to be gradual, and risks are tilted to the downside," it said.
The IMF said unwinding fiscal and monetary stimulus measures would have to wait until a sustainable recovery is underway. But they need to develop exit strategies from stimulus programs, strengthen financial regulation and in the medium term cut budget deficits.
The IMF`s North American division deputy, Marcello Estevao, said rising unemployment is the greatest threat to recovery efforts. "The weakness in the labor market is going to reflect into the weakness in the housing market. When people lose jobs, wages don`t grow as much, it`s harder for people to pay their mortgage, Estevao said. "There is substantial uncertainty exactly how this feedback would play out. And that is one of the reasons we have this very gradual recovery outlook for the U.S." He said the IMF sees U.S. GDP growing "a little bit" in the second half, with a sustained recovery not starting until the second quarter of 2010. The IMF`s forecast for unemployment was unchanged, seeing 2009 unemployment averaging 9.3 percent and rising to 10.1 percent for 2010.

full version...

05.07.2009 19:01 World Economy Review - June 2009

The World Bank said the global recession this year will be deeper than it predicted in March and warned that a flight of capital from developing nations will swell the ranks of the poor and the unemployed. The world economy will contract 2.9 percent, compared with a previous forecast of a 1.7 percent decline, the Washington- based lender said in a report. Growth will be 2 percent next year, down from a 2.3 percent prediction, the bank said.
The bank is more pessimistic than its sister organization, the International Monetary Fund. The IMF, which is forecasting a global contraction of only 1.3 percent this year and growth of 2.4 percent in 2010, said June 19 that it plans to revise estimates "modestly upward."
The World Bank cut its forecast for the U.S. this year, calling for a 3 percent drop in the world`s biggest economy, after predicting a 2.4 percent contraction in March. Japan`s gross domestic product will shrink 6.8 percent, more than the previous prediction of a 5.3 percent decline, the lender said. The euro area`s economy may shrink 4.5 percent, compared with the previous estimate of a 2.7 percent contraction. Global trade may drop by 9.7 percent, compared with a March forecast of a 6.1 percent decline.
Economic growth in the developing world will be 1.2 percent, the World Bank said, scaling its outlook back from 2.1 percent. Developing nations in eastern Europe and Central Asia will be some of the hardest hit, the revised forecasts show. The region`s economy is likely to shrink 4.7 percent this year, down from the 2 percent decline projected in March.
Meanwhile, the Organization for Economic Cooperation and Development (OECD) raised its forecast for the economy of its 30 member nations for the first time in two years as the U.S. slump shows signs of easing. The combined economy of the world`s most-industrialized countries will shrink 4.1 percent this year and grow 0.7 percent in 2010, the Paris-based group, which was founded in 1961 to coordinate international economic policies, said today. The new projections compare with March forecasts for contractions of 4.3 percent and 0.1 percent.
The U.S. economy was largely responsible for the OECD`s prediction that the global recession will reach its bottom in the second half of this year. The world`s largest economy will contract 2.8 percent this year and grow 0.9 percent next year, the organization said in revising its forecast from declines of 4 percent in 2009 and zero growth in 2010.
Even as Japan`s slump shows signs of nearing its end, a slow rebound and excess capacity are likely to further entrench deflation. The organization said the Bank of Japan should better communicate its intention to keep its main interest rate low and hold it at 0.1 percent beyond next year.
In the 16-nation euro-area, signs of a recovery are not as clear, the OECD said, as it cut its 2009 forecast to show a contraction of 4.8 percent compared with 4.1 percent in March. Even though it no longer anticipates a 0.3 percent decline next year, it still predicts stagnation as rising unemployment makes consumers reluctant to spend.
The organization said evidence of a recovery in China, which is not a member of the OECD, was already apparent, with the economy expected to grow 7.7 percent this year and 9.3 percent in 2010. The OECD previously projected expansions of 6.3 percent and 8.5 percent respectively. The government still has room to spend on social programs, the OECD said.
The Brazilian economy will shrink 0.8 percent this year, more than the 0.3 percent forecast in March, before growing 4 percent next year, up from a 3.8 percent estimate, the OECD said. The organization also raised growth predictions for India to 5.9 percent and 7.2 percent this year and next. Such emerging market recoveries mean trade will soon stabilize and begin to pick up by the end of the year, the OECD said. It predicted global trade will expand 2.1 percent next year after plunging 16 percent this year.

full version...

05.06.2009 21:04 World Economy Review - May 2009

Europe should take bolder steps to fix its banks, starting with stress tests of vulnerability, and better coordinate national policies to improve chances of the region shaking off recession during the course of 2010, the International Monetary Fund said. A report from the Washington-based agency, which has provided economic rescue funds for emerging market European countries hit hardest by the global financial crisis, stressed the need for Europe to adopt policies that helped west and east. "Europe is facing the economic storm of a lifetime and it urgently needs to weatherproof its institutions," Marek Belka, who is head of the IMF`s European department, and presented the publication in Paris, said.
ECB interest rates cuts had probably gone about as far as was useful, or near in any case, said Belka, whose main point was to stress the IMF`s call for measures to restore confidence in the banking system, starting with stress tests. "We are coming quite close to the point where the efficiency of interest rate actions is exploited," said Belka. The IMF report repeats the macroeconomic forecasts contained in the IMF`s April 22 World Economic Outlook. It foresees deep recession in 2009 and flat to sub-zero growth for 2010 as a whole despite a pickup that should take place as long as government measures are effective. It sees both advanced and emerging economies in deep contractions in 2009 but the emerging market region returning to growth for 2010 as a whole while advanced economies still struggle, if much less so than this year. The IMF said fiscal stimulus should continue in 2010 and focus on infrastructure and direct transfers rather than tax breaks and subsidies for companies and consumers. "Crisis measures, regulatory, and supervisory actions have been unhelpfully diverse especially in Europe`s well-integrated financial sector," the IMF said.
Meanwhile, the United Nations (UN) has downgraded its world economic forecast for 2009 with a shrinkage of 2.6 per cent from an already pessimistic estimate made five months ago. It also warned that the developing countries would be hit the hardest. "The world economy is expected to shrink by 2.6 per cent in 2009, down from a de cline by 0.5 per cent, according to the pessimistic scenario of the forecast presented in January,`` the UN mid-year report stated.
The report however predicted that "with a coordinated, development-oriented policy scenario, the world economy would recover to an annual growth of 4-5 per cent in 2010-2015, led by a robust growth of 7 per cent per year in developing countries.

full version...

04.05.2009 19:58 World Economy Review - April 2009

The latest forecast by the IMF in its World Economic Outlook shows the global economy contracting in 2009 by 1.3%. While the rate of contraction should moderate from the second quarter of 2009 onward, output per capita is projected to decline in countries representing three-quarters of the global economy. Growth is projected to reemerge in 2010, but at 1.9% it would be sluggish relative to past recoveries. IMF Chief Economist Olivier Blanchard told reporters that the world economy was being battered by competing crosscurrents, with the collapse in confidence and demand continuing to pull the economy down and government stimulus measures and natural stabilization mechanisms pulling the economy up. This is not the time for complacency, and the need for strong policies, both on the macro and especially on the financial fronts, is as acute as ever. But, with such policies in place, there is light at the end of this long tunnel. World growth can turn positive by the end of this year, and unemployment can start decreasing by the end of next year. The IMF experts revised their January forecasts down significantly, particularly for the export nations Germany and Japan, namely, by over three percentage points. The IMF is predicting that growth in Germany will decline by 5.6% in 2009, whereas the six German economic research institutes, which have also published their forecasts, are expecting a drop of 6%. The forecasts are thus getting closer to our prediction of 7%. Eurozone GDP is expected to shrink by 4% this year, and to contract further by 1% in 2010. In comparison, the figures for the US appear almost upbeat: there, the IMF is expecting GDP contraction of only 2.8% in 2009, and stagnation next year. The United Kingdom`s economy was forecast to shrink by 4% in 2009 and the United States by 2.8%. The International Monetary Fund says Russia`s GDP will drop as much as 6 percent this year. The forecast is the most pessimistic analyst outlook on Russia so far. The IMF said Russia`s economy would gain 0.5 percent in 2010. The IMF has changed its forecast for the fall in Ukraine`s GDP in 2009 from 3% to 8%, but it expects the country`s economy to resume growth next year. In 2010, Ukraine`s GDP will grow by 1%, according to the revised forecast contained in the IMF`s World Economic Outlook. According to the forecast, Ukraine`s average annual inflation will slow from last year`s 25.23% to 16.8% this year and 10% next year. At the same time, the current account surplus will reach 0.6% of GDP this year and 1.4% of GDP next year compared, to a deficit of 3.7% of GDP in 2007 and 7.2% of GDP in 2008. IMF experts say that among all the regions of the global economy, the CIS countries are forecast to experience the largest reversal of economic fortune over the near term. The reason is that their economies are being badly hit by three major shocks: the financial turbulence, which has greatly curtailed access to external funding; slumping demand from advanced economies; and the related fall in commodity prices, notably for energy.

full version...

: [1][2][3][4][5][6][7][8][9][10][11][12][13][14][15][16][17][18][19][20][21][22][23][24][25][26][27][28][29][30][31][32][previous][next]

The Economic Articles

Economic Indicators