Some Gloom and Doom and Hope in the IMF's Global Growth Forecast (10/9/2012)

source: IMF
The IMF just lowered its global growth forecast for 2012 and 2013 in its October 2012 World Economic Outlook. After the jump is the full table of the IMF's 2012 and 2013 growth projections, and below that I put up interesting Debt/GDP ratio charts (Historical Debt/GDP in Advanced Economies, "Debt-to-GDP Dynamics after Public Debt Reaches 100% of GDP") from the report. Public debt in advanced economies is at its highest level since World War II. To your right is a chart comparing the U.S. and Canada's Household Debt to Personal Disposable Income percentage since 2000.

It's not really a surprise anymore, but the release said "weak household balance sheets and confidence, relatively tight financial conditions, and continued fiscal consolidation stand in the way of stronger growth" in the United States. Fiscal consolidation meaning the "fiscal cliff." In a blog post, Olivier Blanchard, the IMF's chief economist, said the U.S. must balance monetary accommodation and fiscal consolidation to maintain growth. So that's where the Federal Reserve's QE-infinity program comes in. And for Europe, "the “core” economies are expected to see low but positive growth throughout 2012–13. Most euro area “periphery” economies are likely to suffer a sharp contraction in 2012, constrained by tight fiscal policies and financial conditions, and to begin to recover only in 2013." And Spain and Italy's sovereign debt, banks and economy must stay under control.

For a quick rundown on the IMF's growth projections and fiscal outlook, I embedded two videos from the IMF's Youtube channel.


Source: IMF

Debt retest.

Source: IMF

Source: IMF (Chapter 3: The Good, the Bad, and the Ugly: 100 Years of Dealing with Public Debt Overhangs)




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