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IMF Sets Meager Global Output Targets For 2009 & 2010
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The International Monetary Fund is out with yet another gloomy projection today. We had already seen the reports of another $4.1 trillion in writedowns being needed, but this morning the IMF took the global world output projection for all of 2009 as being -1.3%. It sees a need for sustained policy response to tackle the financial sector and to support demand. The IMF feels that growth can resume in 2010, with strong policies in place.
As you will see in the chart below, the US is now expected to contract at a rate of -2.8% in 2009. This is actually “better” than the advanced economies projections of -3.8%. For 2010, the IMF sees a output at 0.0% for the United States and for the advanced economies. The “Euro area” is projected to see a contraction rate of -4.2% for 2009 and -0.4% in 2010.
If you look at the table, you will see that the only growth prospects are being seen in China and India. The IMF sees 6.5% growth in 2009 and 7.5% growth in 2010 in China; and it puts India’s growth at 4.5% in 2009 and 5.6% in 2010. This sounds like good news for the “Chindia” region, but those growth rates are actually just keeping pace with what is needed to sustain the local economies after you add up the economic expansion and the expenses of each major country. Added up, these two countries account for only about one-third of the world’s total population.
Many economists and stock forecasters have been calling for a relative immunity in Brazil, yet the IMF disagrees. The IMF is forecasting Brazil’s growth as a contraction of -1.3% for 2009 and then a gain of 2.2% for 2010.
For all of these projections to come to pass, the IMF is noting that forceful action is needed on the financial and macroeconomic policy fronts. It also argues for open trade over protectionism.
The new report also notes that unemployment will peak only toward the end of 2010, and should decrease after that. The economic growth that the IMF is being forecast as being sluggish when compared to past recoveries.
JON C. OGG
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