Somehow, I doubt anyone cares too much about this, but for what it’s worth, the IMF has slashed their growth outlook – again.
Back in October, Maury Obstfeld, the Fund’s Economic Counsellor and Director of Research, warned that there were “clouds on the horizon”, the latest in a series of dour prognostications including cautious comments from Christine Lagarde herself.
Obviously, those “clouds” included the seemingly intractable trade dispute between, on one side, the US, and on the other side, virtually every country on the face of the planet worth mentioning economically.
Needless to say, the incoming data has been less than inspiring since October and with the fiscal impulse set to wane stateside, there are concerns that the much ballyhooed “convergence” narrative will manifest itself not in the rest of the world stabilizing or otherwise catching “up”, but rather in the US catching “down” to what, in hindsight, will be seen as the ex-US “reality.”
In the latest update to the Fund’s World Economic Outlook, the IMF warns that while “the downward revisions are modest, the risks to more significant downward corrections are rising.”
They go on to note that “while financial markets in advanced economies appeared to be decoupled from trade tensions for much of 2018, the two have become intertwined more recently, tightening financial conditions and escalating the risks to global growth.” Here are the revised projections:
The US expansion continues, but the forecast remains for a deceleration with the unwinding of fiscal stimulus. Across advanced economies, we foresee growth to slow from 2.3 percent in 2018 to 2 percent in 2019 and 1.7 percent in 2020. This softening growth momentum has provided little lift to inflation. While core inflation is close to target in the United States where growth is above trend, it remains significantly below target in the euro area and Japan.
Economic activity in emerging and developing economies is also projected to tick down to 4.5 percent in 2019, with a rebound to 4.9 percent in 2020. The projection for 2019 has been lowered (0.2 percentage point) from October mainly because of a large projected contraction in Turkey, amid policy tightening and adjustment to more restrictive external financing conditions. There is also a significant downgrade to growth in Mexico in 2019—20, reflecting lower private investment. The projected rebound in 2020 is due to an expected recovery in Argentina and Turkey.
As alluded to at the outset, this is all hopelessly dry and any lack of reader interest in the updated forecasts will invariably be compounded by skepticism towards the IMF in general.
That said, this is one of those things that bears mentioning, as it just adds to the cacophony of high profile names/entities shouting from the proverbial rooftops about the perils inherent in the collision of ongoing trade tensions with DM monetary policy normalization.
“The main policy priority is for countries to resolve cooperatively and quickly their trade disagreements and the resulting policy uncertainty, rather than raising harmful barriers further and destabilizing an already slowing global economy”, the IMF pleads, adding that “monetary policy in advanced economies should continue to normalize carefully [and] the major central banks [should be] keenly aware of the slowing momentum.”
We’ll leave it to readers to decide whether this is notable or not. One person who most assuredly doesn’t care is this guy…