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IMF: World Economy Will Slow In 2011

From a rosy spectacled New York Times:

I.M.F. Raises Growth Forecasts for World Economy

By BETTINA WASSENER

July 8, 2010

HONG KONG — The good news is the world economy will grow faster than expected this year. The bad news is recovery remains overshadowed by major risks, and the pace of growth is likely to slow next year.

That was the thrust of the International Monetary Fund’s latest assessment of the global economy, which was released on Thursday…

So far this year, growth has been stronger than widely expected, particularly in Asia and other emerging markets, prompting the I.M.F. on Thursday to raise its global growth forecast for 2010 to 4.6 percent. That is up from the 4.2 percent projection it had issued in April.

Overshadowing the recovery, however, is the lingering danger that the concerns over the high debt levels of several of the smaller European economies will escalate into a wider financial crisis, the I.M.F. cautioned

In addition, the I.M.F. said growth is expected to slow during the second half of this year and into next year.

Advanced countries, for example, expanded an estimated 3 percent during the first half, the I.M.F. said, but the pace is expected to fall to only 2 percent during the second half of 2010, as growth in private demand slows.

For 2011, the I.M.F. projects a global expansion of 4.3 percent, a more muted pace than for this year, as governments around the world gradually withdraw the stimulus measures they implemented as the global financial crisis escalated in late 2008

So the IMF is projecting that the world’s economic growth will actually slow down once the government spending (stimulus) is removed.

Growth in Japan will slow from 2.4 percent this year to 1.8 percent in 2011, and in the United States, from 3.3 percent this year to 2.9 percent next year

It raised its 2010 growth forecast for China to 10.5 percent, but projects 9.6 percent for 2011, down from the 9.9 percent it had previously forecast

Just to give the IMF’s predictive power some perspective, we harken back to their predictions for the second half of 2007 and 2008:

Global Growth Seen at 5.2 pct in 2007

July 25, 2007

    * Strong global expansion continuing
    * Growth projections revised upward for 2007 and 2008
    * Credit and market risks on the rise

The global economy continued to expand at a brisk pace in the first half of 2007, according to the July update of the IMF’s World Economic Outlook (WEO).

"Emerging market countries have led the way, with China growing by 11½ percent in the first half of 2007, and India and Russia also growing very strongly," Charles Collyns, Deputy Director of the IMF’s Research Department, told reporters on July 25…

Against this background, global growth is now projected at 5.2 percent in 2007 and 2008—0.3 percentage points higher for both years than projected at the time of the April 2007 World Economic Outlook (see table)…

So the IMF is not quite Nostradamus.

This article was posted by Steve on Thursday, July 8th, 2010. Comments are currently closed.

One Response to “IMF: World Economy Will Slow In 2011”

  1. Reality Bytes says:

    Ever get the feeling we’re a bunch of ants under the magnifying glass of some mean kid? If only they knew to leave us alone, we wouldn’t be burning up.


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