The rudderless IMF still has the capacity to issue long-term forecasts for global growth. Its recently published June World Forecast proves that. As it looks ahead, it sees what many economists do. Short-term global GDP growth will weaken, but will pick up next year and the next.
The IMF predicts that the US economy will also stutter briefly and this will be followed by a reasonably healthy 2012.
Global GDP growth will be 4.3% this year and 4.5% next. This, of course, depends largely on China and other large emerging nations. The US, UK, EU, and Japan as still hampered by the credit crisis and March earthquake.
US GDP is expect to rise 2.5% this year and 2.7% in 2012. Each of these forecasts is down slightly from the April IMF predictions. Speaking about the U.S. slowdown, Olivier Blanchard, the Fund’s Economic Counsellor, said he saw it more as “a bump in the road rather than something more worrisome,” although the U.S. recovery remained weak. Blanchard does not mention that the US had moved in the direction of double dip recession or at least a stagnation of growth. GDP may not reach 2.5% this year. That will probably affect the 2012 number as well
Two more tests of the reality of the World Forecast include that Spain’s GDP will rise .8% this year and 1.6% next. Reform may help Spain’s deficit problem, but the nation still has an unemployment rate of 20% and its bank system is in ruins. Austerity measures could move unemployment higher. The World Forecast also says that UK GDP will be higher by 1.5% this year and 2.3% next. Recent PMI data have caused economists to predict second quarter GDP in the UK will rise no more than .3%.
The IMF document has the usual caveats. The price of oil could derail global growth. A credit and liquidity crisis in Europe cold slow the worldwide rebound. China may be more troubled by inflation than expected.
It is not the caveats that make the IMF forecasts less than plausible. It is the reality of how the world’s economic health looks today.
Douglas A. McIntyre
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