From Bankia, a Wednesday alert on global economic developments: the International Monetary Fund warns that the global economy is entering yet another new dangerous phase:
“activity is weakening across the board, the agents’ confidence has plummeted, regional disparities persist and there are increasing risks of downturns in all different scenarios.
“The IMF has revised its general forecasts pointing out a significant downturn: global growth would stand at 4% for both 2011 and 2012 (-0.3 p.p. and -0.5 p.p., respectively, compared to the review in June). On this occasion, both developed and emerging countries suffer cuts in their estimates of growth, although to a greater extent the first and from lower levels.”
The IMF warns of the risks associated with multiple negative shocks and slow progress on two fundamental shifts: first, private demand still has to take over from public incentives (on which developed countries are especially behind); and second, in the economies with external surplus, domestic demand must play a greater role in growth while countries with deficit must do so in the foreign sector.
“The developed economies are the ones that have a more complicated panorama and that generate more doubts about their ability to recover: IMF forecasts a growth of 1.6% in 2011 (-0.6 p.p.) and of 1.9% in 2012 (-0.7 p.p.).
And the details are, as expected, not nice.
“The forecasts for the US have suffered the most pronounced downward adjustment (within the large economies): up to 1.5% in 2011 and 1.8% in 2012 (almost 1 p.p. below the June forecast, for each year). In addition, the approved tax cuts, coupled with the weak housing market and the rising household savings, maintain the negative bias.
“For the EMU, the IMF has reduced its forecast to 1.6% in 2011 (-0.4 p.p.) and 1.1% in 2012 (-0.6 p.p.). The improvement in expectations raised by the good start of the year in Germany and France has not met confirmation in recent months.
“Germany could reduce growth to 2.7% in 2011 (-0.5 p.p.) and to 1.3% in 2012 (-0.7%).
“The forecast for Spain remains stable at 0.8% in 2011, but suffers a reduction of 0.5 p.p. for 2012, up to 1.1%
“Greece and Portugal would be the only two economies in the EMU that, after falling this year, would remain in recession in 2012.
“The emerging economies suffer their first decrease in their forecasts in almost two years, registering thus the weak demand from developed countries even though growth rates remain dynamic.”