IMF Forecast: Global Economy In A Weak Recovery
By admin July 31, 2014




The International Monetary Fund (IMF) released its World Economic Outlook (WEO) update on July 24, 2014, titled “An Uneven Global Recovery Continues”. The report reflected a decrease in global growth from 3.7% in April to 3.4% currently.


The downward figure is a reflection of the weak start to the year in the United States due to a stronger correction to the inventory overhang at the end of 2013. The figure is also a less optimistic outlook for several emerging markets, including China, Brazil and Russia. Fortunately, among the negative surprises, four countries are forecasted to experience strong growth: Japan, Germany, Spain and the United Kingdom.


After the recessions in the Euro Area over the last two years, economic growth is predicted at 1.1% according to the WEO update. The problem is an uneven growth across the region: France and Italy are on the downside, while Germany and Spain are on the upside. The continued financial fragmentation, impaired private and public sector balance sheets, as well as high unemployment in some economics are the underlying causes.


Geopolitical risk has risen since April, as risks of an oil price spike become higher and Russia’s involvement in the conflict in Ukraine. The IMF downgraded Russia’s growth from 1.3% to 0.2%, the biggest reduction in the forecasts among developing economics. The ultimate figure could be worse since IMF’s forecast excluded the effects of recent sanctions on the country imposed by the US, the UK, Germany, France and Italy. The sanctions are designed to end Russian support for violent separatists in Ukraine, and could target entire sectors.


On the other side, the largest uplift in the report is the UK: from a 2.8% to a 3.2% expansion of the economy. Analysts attribute the UK’s recovery to the wider employment compared to previous recoveries, the housing market recovery, the improved manufacturing output, as well as strong consumer spending.


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