Forecasts from this fall’s IMF meeting in Peru are worrisome, due to the sluggish growth of global markets from both established and emerging economies
For some time now, market players have been concerned mainly with the Fed and the first hike in interest rates, the deceleration of China’s economy, and the implications of both for global growth. Indeed, the outlook for the world economy is looking dire. The first half of the year seems to have been the best, since activity all around slowed down in the 3Q and forecasts for the year are being revised down.
The U.S. and U.K. have the best performing economy currently, with growth expected to be from 2 to 2.5 percent for 2015, and a little bit faster next year. The European Union, thought to grow between 1 and 1.5 percent this year, is in a bit of trouble because Germany, the fastest growing economy in the region, seems to be slowing. No one knows, at this point, how much or whether the Volkswagen scandal will affect German exports in general.
In Japan, growth estimates are close to one percent only, and corporations don’t seem ready yet to increase investment meaningfully. Growth in the rest of developed nations is sluggish, at best.
Then we have the emerging economies. China has been decelerating and there doesn’t seem to end in sight. Growth estimates are now below the official seven percent target, at around 6.8 percent for 2015, and even less for 2016. Brazil and Russia are in recession, and India is the only one growing decently. The rest of the emerging countries, with some happy exceptions like Mexico, are mostly weak as a result of either the meltdown in commodity prices, because they are producers, or they are at risk of the hike in U.S. interest rates, because their governments and companies are deep in foreign debt, or both. So growth out of these countries is expected to be way below the usual.
From October 9 to 11, Peru is playing host to the International Monetary Fund’s fall meeting. The IMF’s latest economic growth estimates for 2015 and 2016 were just published, and their evolution shows how the outlook for the world’s economy has been slowly deteriorating.
It has not been a happy IMF meeting. It has been all about the risks facing the world economy, and warnings to governments and central banks of the possibility of a new global recession. Hopefully, they will listen and strive to protect and nurture what growth there is.
Meanwhile, we expect 2016 to again be a struggle, and look forward to meaningful improvement in 2017, when governments will be in a better position to help stimulate growth through fiscal policy measures.
At Intercam, we are interested in receiving your feedback on our articles. Contact us