Global Economy Reviews

03.11.2008 17:24 World Economy Review - October 2008

The world economy will slow sharply this year and next, with the United States likely sliding into recession reflecting mounting damage from the most dangerous financial jolt in more than a half-century. The International Monetary Fund, in a World Economic Outlook released Wednesday, slashed growth projections for the global economy and predicted the United States - the epicenter of the financial meltdown - will continue to lose traction.
The IMF now projects that the global economy, which grew by a hardy 5 percent last year, will lose considerable speed, slowing to 3.9 percent this year. It is forecast to weaken even more - to just 3 percent - next year, marking the worst showing since 2002. In the past, the IMF has called global growth of 3 percent or less the equivalent to a global recession. In the United States, the economy, which grew by 2 percent last year, is projected to slow to 1.6 percent this year. Growth would screech to a virtual halt in 2009, barely budging at just 0.1 percent. That would mark the worst showing since 1991, when the country was pulling out of a recession.
Looking at other countries, Germany`s growth will slow to 1.8 percent this year, down from 2.5 percent last year. France`s growth will weaken to just 0.8 percent, compared with 2.2 percent in 2007. Britain`s economy will see growth taper to 1 percent, down from 3 percent last year. Canada`s growth will tail off to 0.7 percent this year, from 2.7 percent last year. In Japan, growth will cool to just 0.7 percent, from 2.1 percent last year. Global powerhouses China and India will see growth clock in this year at a robust 9.7 percent and 7.9 percent, respectively. Even if those projections prove correct, they would still mark downgrades from their blistering performances last year. Russia`s economy should grow by a brisk 7 percent this year, down from 8.1 percent last year. Inflation around the world remains high, driven up by surging energy and food prices through much of this year.

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02.10.2008 21:09 World Economy Review - September 2008

The global economy faces its most difficult test in many years with growth slowing sharply as high commodity prices put pressure on inflation, a senior International Monetary Fund official said. IMF first deputy managing director John Lipsky said global growth was set to slow further in the second half of 2008, and continued financial sector strains were a major risk to the chances of recovery in 2009, on top of high oil prices. Commodity prices remained high and volatile, bringing risks of knock-on inflation effects, but recent sharp falls in oil prices should lessen short-term inflation pressures in the developed world, he told a conference. Central banks in advanced economies could afford to keep interest rates on hold. In regions with high real rates, they could look out for easing price pressures which would allow them to loosen policy later, he said. "Against the backdrop of protracted financial strains and dramatic surges in commodity prices, the global economy is confronted with its most difficult set of circumstances in many years," he said. "The good news is, we are only three to six months from the bottom, when the upturn begins."
Lipsky said the IMF was still reviewing its forecasts, which are due to be updated in its World Economic Outlook next month. But the fund saw global growth slowing from 5 percent in 2007 to about 3 percent late in 2008, reaccelerating towards 4 percent in 2009. The IMF`s last forecasts in mid-July were for global growth of 4.1 percent in 2008 and 3.9 percent in 2009. A G20 source told Reuters last month that these would be downgraded to 3.9 percent this year and 3.7 percent in 2009. Lipsky said the 2009 pickup would be driven by an unwinding of the effects of the past 50 percent increase in oil prices and a bottoming in the U.S. housing sector. Oil traded at a five-month low below $105 per barrel on Tuesday. In the United States, the IMF expected growth of about 1 percent in 2008 on a fourth-quarter-on-fourth-quarter basis, recovering gradually to about 1.5 percent in 2009, Lipsky said. This calculation was different from the annual growth rates forecast in its headline projections, he stressed. In mid-July, the IMF forecast U.S. growth of 0.3 percent in 2008 and 1.9 percent in 2009 on a Q4/Q4 basis, with full-year growth seen at 1.3 percent in 2008 and 0.7 percent in 2009. In the euro area, the IMF projected growth on a Q4/Q4 basis at about 0.75 percent in 2008 and about 1.5 percent in 2009, from 1.3 percent and 1.7 percent respectively in mid-July.
Lipsky said that although the IMF expected commodity prices to remain high in real terms, slower growth and cheaper oil should help to contain inflation pressure in advanced economies. "Thus, policymakers can afford to keep rates on hold in the face of elevated headline inflation, while watching closely for signs of easing price pressure that would permit a more accommodative stance in economies with relatively high real interest rates," he said. The European Central Bank held rates at 4.25 percent last week but is expected to cut them in mid-2009 and the Bank of England`s next move is also likely to be a cut. The U.S. Federal Reserve is expected to stay on hold for now, after cutting rates in the past year. Lipsky said that in emerging markets inflation pressures were growing while real interest rates remained low and some central banks may be "behind the curve" with their monetary policy. "Policies in these instances need to be tightened, lest central banks run the risk that hard-won policy credibility could be eroded. In some cases, allowing greater exchange rate flexibility would provide room for operating a more independent monetary policy." The IMF saw growth in emerging and developing economies of just over 6 percent in 2008 on a Q4/Q4 basis, broadly in line with the IMF`s mid-July outlook.

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02.09.2008 23:15 World Economy Review - August 2008

The latest from the International Monetary Fund (IMF) has downgraded its world growth forecast for this year to 3.9% from 4.1% issued just a month ago, and projects 2009 growth at 3.7%, down from 3.9%. The fund left unchanged its 2008 forecast for U.S. growth at 1.3%, but shaved its outlook for 2009 growth to 0.7% from 0.8%. It cut its forecast for Eurozone growth the most; expansion this year is expected at 1.4%, down from 1.7%, while 2009 growth is forecast at 0.9%, down from 1.2%.
The IMF has lowered its growth forecast for Britain to 1.4% in 2008, dropping to 1.1% in 2009. Over the next few quarters growth is expected to be 0.1% to 0.2% quarter-to-quarter, says Chopra. It would only take a small shock to push the country into a recession, as defined as two consecutive quarters of negative growth.
Japan`s real GDP is forecast to register a slower growth of 1.4% in 2008 (2007:2.1%) as the trade exposure to the US takes its toll. China, while a magnet for investment and retail sales, remains one of the largest sources of FDIs with its GDP growth surging to 11.4% in 2007. Despite a bleak global outlook and higher interest rates, China`s economy is still predicted to grow by about 10% in 2008 and 2009.
All in all, Latin America is expected to post GDP growth of 4.5 percent this year, the IMF predicts. Brazil, Latin America`s largest economy, will likely expand by 4.9 percent this year. Mexico, the second-largest economy, will grow by 2.4 percent. Argentina`s economy, the region`s third-largest, should end up the year with GDP growth of 7.0 percent. Venezuela`s economy, Latin America`s fourth-largest, is expected to increase by 5.8 percent this year.

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14.08.2008 16:55 World Economy Review - July 2008

Growth rates of global economy in the current year become the lowest for the last fifth anniversary, despite essential growth of the countries with developing economy (emerging markets), and the next 18 months will be for it "times of trouble", is spoken in the message extended on Wednesday on data of report Global Economic Outlook of international agency Fitch Ratings. To so-called emerging markets the countries BRICK (Brazil, Russia, India and China) concern, in particular. As it is marked, reduction of growth rates f economic passes against recession in housing and consumer sectors of the countries with the developed economy.
Under forecasts Fitch, gross national product growth in 2008 will make 1 % in the USA, 1,3 % - in Japan, 1,4 % - to the Great Britain and 1,7 % - in an eurozone. "The economic will worry a time of trouble the next 18 months. In the conditions of movement towards recession in economy of the USA in 2008 Fitch predicts growth at level of 1,3 % in the leading countries with the developed economy (which number includes the USA, the eurozone countries, Japan and the Great Britain), that does not exceed level of 2001", — is spoken in the message.
In Fitch notice, that 2001 was "especially weak year for the leading countries with the developed economy when the technological bubble has burst and stagnation in Japan was observed, and exclusively synchronous recession" became the culmination. Growth of world gross national product in the current year will be above level of 2001, including thanks to economic stability of Brazil observed recently, Russia, India, China and other countries with emerging markets. "At the same time, if to start with the market exchange rate, world economic growth will make 2,6 % that is the weakest significance for the last five years", — ascertain in Fitch.
The U.S. economy probably won`t return to steady, healthy growth for another year, according to economists` latest predictions published in the Blue Chip Economic Indicators. The median forecast of 50 economists for this year`s gross domestic product growth remained at 1.6% in the August edition of Blue Chip published on Sunday. For next year, the median estimate fell to 1.5% from 1.7%.
The economists surveyed by Blue Chip see growth at 1.2% in the third quarter, 0.3% in the fourth quarter, 1.1% in the first quarter of 2009 and 2% in the second quarter. It isn`t until the third quarter of 2009 that GDP growth would rebound to close to its potential of 2.5% or so.

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01.07.2008 20:31 World Economy Review - June 2008

The World Bank cut its 2008 global growth forecast to 2.7%, citing rising food and oil prices. In January 2008, the bank predicted that global growth would total 3.3% for the year. The global economy grew 3.7% in 2007. Further, the bank now sees 2008 emerging market GDP growth totaling 6.5%, down from its earlier 7.8% forecast. The bank called high energy and food prices "a major worry" and added that they "are the dominant force behind increased inflation across developing countries".
Also, the World Bank expects the U.S. economy to grow 1.1% in 2008, a downward revision from the bank`s earlier 1.9% forecast. Meanwhile, the bank expects Europe`s 15-nation euro zone to grow 1.7%, down from the earlier estimate of 2.8%. Japan`s economy is expected to grow 1.4%, down from the earlier estimate of 2%.
Further, the World Bank also sees a considerable slowdown in China`s economy in 2008, but GDP growth is still expected to remain very strong. The bank now sees China`s GDP increasing 9.4%, down from the earlier 11.9% estimate. The World Bank`s revised GDP growth forecasts for 2008 and 2009 by region are: Euro zone, 1.7% and 1.5%; Europe and Central Asia, 5.8% and 5.4%; South Asia, 6.6% and 7.2%; Latin America, 4.5% and 4.3%; Middle East and North Africa, 5.5% and 5.3%; and Sub-Saharan Africa, 6.3% and 5.6%.
Meanwhile, The global economy would collapse if oil hit $200 a barrel, said the top energy analyst at Germany`s largest bank. "Two-hundred dollar oil would break the back of the global economy", Deutsche Bank AG`s Chief Energy Economist Adam Sieminski said in an interview today in Tokyo. "Next step after $200 would be global recession and bad news for everybody".
Sieminski`s comments come after Goldman Sachs Group Inc. forecast oil may rise to between $150 and $200 within two years as supply growth, especially from producers outside the Organization of Petroleum Exporting Countries, fails to keep pace with demand.

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