Gloomy Out­look

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

The Playa Times Riviera Maya's English Newspaper - - Enterprise Focus - BY PAT­TIE BERRY - INTERCAM

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.

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at ft­fer­nan­dez@intercam.com.mx

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