Sunday 22 Jul 2018 | 01:39 | SYDNEY
Sunday 22 Jul 2018 | 01:39 | SYDNEY

New IMF forecasts: Good, bad and ugly


Mark Thirlwell

9 July 2009 11:45

The IMF has released the latest revisions to its world economic outlook. Its something of a mixed story:

  • The good: the Fund thinks the world economy is beginning to pull out the Great Recession. As a result, the IMF has upgraded its growth forecast for 2010, upping predicted growth by just over half a percentage point to 2.5% (using purchasing power parity [PPP] weights: at market exchange rates, world growth is forecast to be 1.7%). 

  • The bad: the Fund still thinks that recovery, when it arrives, will be sluggish, with the advanced economies not forecast to show a sustained pickup in growth until the second half of next year. Moreover, for the longer term, the IMF thinks the crisis has probably reduced the world economy’s level (and, potentially, rate) of sustainable output growth.
  • The ugly: while rate of decline in global economic activity is moderating, in many economies the recession is not over – a point visible in the last set of US employment numbers. As a result, the Fund has slightly marked down its forecast for global growth this year, to -1.4% (or -2.6% at market exchange rates).

How do the IMF’s projections compare with the World Bank numbers released last month? While the headline numbers may appear to differ quite a bit – with the Bank widely quoted as predicting a 2.9% fall in output this year — in large part this reflects the different choice of exchange rate weights. If we look instead at the Bank’s PPP-weighted forecast for 2009, then at a predicted -1.7%, this is pretty close to the Fund’s -1.4%.