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The Eternally Optimistic IMF

Summary:
The International Monetary Fund believes that ringing alarm bells on global economic growth is not its job, especially with many observers spotting signs of improvement in the past few weeks. But with economic conditions set to worsen before they improve, complacency is likely to have a high cost. PRINCETON – In April 2018, the International Monetary Fund projected that the world economy would grow robustly, at just above 3.9% that year and into 2019. The global upswing, the Fund said, had become “broader and stronger.” That view quickly proved too rosy. In 2018, the world economy grew only by 3.6%. And in its just released update, the IMF recognizes that the ongoing slowdown will push global growth down to only 3.3%

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The International Monetary Fund believes that ringing alarm bells on global economic growth is not its job, especially with many observers spotting signs of improvement in the past few weeks. But with economic conditions set to worsen before they improve, complacency is likely to have a high cost.

PRINCETON – In April 2018, the International Monetary Fund projected that the world economy would grow robustly, at just above 3.9% that year and into 2019. The global upswing, the Fund said, had become “broader and stronger.” That view quickly proved too rosy. In 2018, the world economy grew only by 3.6%. And in its just released update, the IMF recognizes that the ongoing slowdown will push global growth down to only 3.3% in 2019.

As always, the Fund blames the lower-than-forecast growth on temporary factors, the latest culprits being US-China trade tensions and Brexit-related uncertainties. So, the message is that growth will rebound to 3.6% next year. As Deutsche Bank points out, IMF forecasts imply that fewer countries will be in recession in 2020 than at any time in recent decades.

But the forces causing deceleration are still in place. Global growth this year will be closer to 3%, with rising financial tensions in Europe.

The Eternally Optimistic IMF

The IMF keeps getting forecasts wrong...

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