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2014-10-08 07:56:33
Oct 7th 2014, 13:48 by R.A. | LONDON
THE International Monetary Fund has just released the full update to its fall
World Economic Outlook, which includes its latest forecast for global growth.
The picture is not pretty:
Back in January the IMF thought the world might manage growth of 3.7% this
year. That dropped to 3.6% in April, to 3.4% in July, and to 3.3% in the new
report. If growth is written down any more then this year's performance will
come in below that in 2013, of 3.3%, making 2014 the fourth consecutive year in
which global output has slowed relative to the prior year's showing. The steady
deterioration in the global economy's performance is remarkable for several
reasons, including just how long it has taken the world to catch on to the
trend. In a box in the first chapter of the WEO the IMF acknowledges that even
though its forecasts have gotten ever gloomier since 2010 they have not gotten
gloomy enough, fast enough. From 2011 to 2014, the IMF notes, its year-ahead
forecasts were 0.6 percentage points too optimistic on average. That doesn't
bode well for the remainder of this year or for next; at the moment the IMF
forecasts growth of 3.8% in 2015.
The IMF's downward revisions are broad-based. Both Europe and Japan are
expected to grow much less this year than was previously forecast (and both
received downward nudges to their 2015 projections as well). Emerging markets
also come in for rough treatment; indeed, overall GDP growth in emerging
markets is now forecast to be just 4.4% in 2014, just 2.6 percentage points
better than advanced economies. Interestingly, it is Latin America, the Middle
East and sub-Saharan Africa that get the big revisions this time around.
Brazil's growth has been written down a full percentage point; it is now
expected to expand by just 0.3% in all of 2014.
The news could get worse in future, the IMF reckons. Its current projections
assume sensibly accommodative fiscal and monetary policy, as well as a decline
in geopolitical tensions. That is disconcerting. The growth slowdown since 2010
is already one of the most dramatic of the last 40 years, comparable to the
swoons that accompanied the Latin American crises of the late 1980s and the
Asian crisis of the late 1990s (though not as large as the drop in 2008-9).
Officials in Washington, gathered for the autumn meetings of the World Bank and
IMF, will be hoping the outlook shocks governments into decisive action to
support global growth. Unfortunately, policy makers seem to be growing inured
to bad economic news.