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IMF: Global growth forecast trimmed - ING

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Apr 13, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    Tim Condon, Chief Economist at ING, suggests that the IMF has cuts its forecast for global growth but retained its China forecast.

    Key Quotes

    “We don’t think the IMF’s downgrades of its estimates of potential growth of world GDP or trade volumes are over.

    As expected, the IMF cut its forecast for 2016 global growth to 3.2% from 3.4%. A day earlier the World Bank shaved its forecast even more, to 2.5% from 2.9%. The IMF’s latest forecast is 0.1ppts above 2015 growth while the World Bank’s is flat to 2015 growth. The sister institutions left their China forecasts unchanged at 6.5% and 6.7%, respectively (ING 6.5%, Bloomberg consensus 6.5%).

    The IMF WEO contains a chart showing the evolution of the IMF’s global growth forecasts over time. We think the forecasts for outer years are the IMF’s estimate of potential growth. The forecast in the April 2012 WEOs was 4.1%. The forecast in the latest WEO is 3.5%. Growth hasn’t reached 3.5% for five years, including this one.

    There is a similar chart on world trade volume growth that implies the estimate of potential growth has slowed to 3.8% from 5.4%. From 2011 through 2014 world trade volumes grew by a very steady 2.5%. Growth slowed to 2.0% in 2015 (with most of the deceleration coming after the 811 CNY devaluation) and was 1.1% in January 2016.

    Two separate shocks slowed global growth in 2015: the adverse shock to commodity producers from the commodity price crash in 2H14 and the 811 CNY devaluation. Our baseline is that the growth shocks persist and that neither the IMF’s estimate of potential world GDP growth nor its estimate of potential trade volume growth has bottomed.”
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