World Economic Outlook Update
The IMF released an update to its World Economic Outlook report yesterday. The headlines:
"The global economy is in a tough spot, caught between sharply slowing demand in many advanced economies and rising inflation everywhere, notably in emerging and developing economies. Global growth is expected to decelerate significantly in the second half of 2008, before recovering gradually in 2009." No surprises there .....
- Growth for the USA in 2008 likely to be 1.3% on an annual-average basis, however the economy is expected to contract moderately in the second half of the year. Growth in the Euro area and Japan also likely to show a slowdown in the second half of 2008.
- In China, growth is now projected to reduce from nearly 12 percent in 2007 to around 10 percent in 2008–09.
- The continuing decline in the U.S. dollar and slower growth of the U.S. economy relative to its trading partners have put the current account deficit on a more sustainable trajectory.
- In emerging and developing countries, inflationary pressures are mounting faster, fueled by soaring commodity prices, above-trend growth, and accommodative macroeconomic policies. Hence, inflation forecasts for these economies have been raised by more than 1.5 percentage points in both 2008 and 2009, to 9.1 percent and 7.4 percent, respectively.
- Energy, oil and food prices are likely to remain high and volatile, with the baseline forecast showing only moderate declines.