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  • IMF Lowering Expectations for Growth in China

    The IMF released its economic outlook for China this morning, and the big takeaway is that IMF economists have lowered their expectations for economic growth. The Chinese economy has, once again, shown its resilience in the midst of a difficult external environment, buoyed by robust corporate profitability and rising household incomes. However, net exports will prove to be a significant drag on growth in the coming two years, with the current account surplus remaining at 3–4 percent of GDP. As a result, growth is expected to fall to 81⁄4 percent this year (from 9.2 percent in 2011), gathering speed in the latter part of this year and rising to 83⁄4 percent in 2013. Here is a look at the IMF's GDP growth projections for China this year: And here is one look at the importance of exports to China's economy: While China weathered the Global Economic Recession of 2008-2009 relatively well, the big concern is that Europe's economic woes will hit China harder this time around. Read the IMF's China Economic Outlook here . (Hat tip Reuters )

  • The IMF Growth Tracker Showing Moderating Growth Across Global Economy

    The IMF's World Economic Outlook shows a worrying global economic slowdown, led by Europe and the US. Among the many causes cited for slowing economic activity is the lack of demand in the private sector. The IMF's researchers suggest that they expected a quicker "handover from public to private demand." The tsunami and earthquake damage in Japan also bears some of the blame, as do disruption in oil supplies in North Africa this year. A lasting, and troubling factor is the lack of confidence on the part of consumers and businesses in developed economies of the West. The ripple effects of the dip in confidence are being felt around the globe. Note the impact on growth, as shown in the IMF's Growth Tracker : From the report: Worryingly, various consumer and business confidence indicators in advanced economies have retreated sharply, rather than strengthened as might have been expected in the presence of mostly temporary shocks that are unwinding. Accordingly, the IMF’s Growth Tracker (Figure 1.4, top panel) points to low growth over the near term. WEO projections assume that policymakers keep their commitments and the financial turmoil does not run beyond their control, allowing confidence to return as conditions stabilize. The return to stronger activity in advanced economies will then be delayed rather than derailed by the turmoil. Read the World Economic Outlook, and watch video of the IMF staff discussing their findings, here .

  • Martin Wolf: Economic Rehab Promises to be a Grind

    In the IMF 's latest World Economic Outlook update, projections for GDP growth increased across emerging, developing, and advanced economies: That is a good trend, to be sure, but as the Financial Times 's Martin Wolf warns, it will be a long time before it feels like the economy has turned around: The worst of the financial crisis may be behind us, but the financial system remains undercapitalised and weighed down with an as yet unknown burden of doubtful assets. It is also far from a truly “private” financial system. On the contrary, it is underpinned by massive explicit and implicit taxpayer support. The probability of mischief down the road is close to 100 per cent. But the current hope is that the road to any such mischief goes via a recovery. Equally, the expected economic “recovery” is not going to feel like much of one. The latest consensus forecasts for growth in the high-income countries for 2010 are well below potential. Yet this is also at a time when the admittedly uncertain estimates of “output gaps” (or excess capacity) are at extreme levels. For 2009 the OECD estimates these at 4.9 per cent of potential gross domestic product in the US, 5.4 per cent in the UK, 5.5 per cent in the eurozone and 6.1 per cent in Japan. Given the forecasts for modest growth, excess capacity will be greater at the end of 2010 than at the end of 2009. The risks to inflation – or rather risks of deflation – are self-evident. So are the chances of further jumps in unemployment. In keeping with this, the “breakeven rate” of inflation implied by inflation-indexed and conventional US treasury bonds has fallen again, to close to 1.5 per cent. June’s hysteria over rising yields on conventional bonds looks absurd. Read After the storm comes a hard climb here . And read the World Economic Outlook update here .

  • IMF Projects Global Growth of -1.3%

    The International Monetary Fund released its April World Economic Outlook report today, and economists and policy makers around the globe are squirming over its findings. The latest IMF projections show the global economy in its worst recession since World War II. The global economy is in a severe recession inflicted by a massive financial crisis and an acute loss of confidence. Wide-ranging and often unorthodox policy responses have made some progress in stabilizing financial markets but have not yet restored confidence nor arrested negative feedback between weakening activity and intense financial strains. While the rate of contraction is expected to moderate from the second quarter onward, global activity is projected to decline by 1.3 percent in 2009 as a whole before rising modestly during the course of 2010 (see right). This turnaround depends on financial authorities acting decisively to restore financial stability and fiscal and monetary policies in the world’s major economies providing sustained strong support for aggregate demand. The U.S. economy is projected to contract at a rate of 3.8% (-3.8% growth), while Britain is expected to see contraction of 4.1%. Japan is heading for growth of -6.2%. The Euro Area as a whole is projected to see -4.2% growth--Germany leading the way at -5.6%; -3.0% for France and Spain, and -4.4% for Italy. China and India are projected to see economic growth of 6.5% and 4.5%, respectively. The report does project global economic growth for 2010, but at a relatively slow rate of 1.9%. You can read the first chapter of the report here , or a summary from the IMF press office here . And watch Olivier Blanchard (at left), director of IMF's Research Department, introduce the report by clicking here .