The International Monetary Fund (IMF) slightly lowered its forecast for global economic growth in 2013 to 3.5% (versus 3.6% forecast in October), and in 2014 to 4.1% (vs. 4.2% in October).
The growth rate in 2012 stood at approximately 3.2%. In reference to the expected moderate growth in the next year, said the chief economist of the IMF:
“It’s clear that financial markets are ahead of the real economy.
The question is whether they are too much ahead or not…
What we know is that it always takes some time for financial markets’ optimism to feed to the real economy and at this stage there are still obstacles to it”.
The IMF economists estimate that the Eurozone’s economy will contract in 2013 by 0.2%, compared to the previous forecast (October) of a 0.2% growth.
The IMF warned that the Eurozone still poses a major risk to global economy.
Nonetheless, they predict that the economic situation will improve and that in 2014 the Eurozone’s economy will grow by 1%.
The IMF economists slightly cut their forecast for the U.S. economic growth in 2013 to 2% (vs. 2.1% forecast in October), but, at the same time also raised their economic growth forecast for 2014 to 3% (vs. 2.9% forecast in October).
The fund said:
“U.S. politicians have to insure that the country gets through the debates regarding raising the debt ceiling without severe fiscal restraints.
Politicians must agree on a credible medium-term fiscal consolidation plan, focused on entitlement and tax reform.”
The IMF did not change their estimates regarding the Chinese economy – a growth of 8.2% this year and 8.5% in 2014.
The fund’s chief economist said that:
“It’s not the rates that we saw before the crisis, but these rates are long gone”
But added that things are generally fine.
To summarize the global economic situation we note the phrase that the IMF managing director, Christine Lagarde, has coined:
“We stopped the collapse, we should avoid the relapse, and it’s not time to relax”
Positively, we should note that most of the economic data published this week in the U.S., Europe and China were encouraging.
We mainly note the rise in the Purchasing Managers indices in January (PMI).
Regarding the European economy, we note the significant improvement recorded last week in most of the expectation surveys.
However, expectation surveys continue to show the expectations for further contraction of the European economy in the coming months, even if at a relatively moderate pace (compared to the anticipated contraction in the fourth quarter).