World Recovery Stalls According to IMF Revised Economic Forecast

Thursday, August 23, 2012


Supported by 188 member economies, the International Monetary Fund (IMF) is an organisation that monitors the economies of its members and allows for the temporary borrowing of funds to member economies suffering economic imbalances.

 

In a disappointing development, the IMF revised down its 2012/13 World Economic Outlook (WEO) levels in July, dampening hopes of a swift global economic recovery. This revision is disappointing for the rest of the world which was hoping on the collective power of emerging markets to lift global growth with their high levels of consumer demand and growth. The IMF’s “growth forecast for developed economies in 2012 was cut by 0.7 percentage points to a mere 1.2%, while the 2013 forecast was reduced by 0.5 percentage points to 1.9%. The forecast for emerging markets was also reduced by 0.7 percentage points for 2012 to 5.4%, and by 0.6 percentage points for 2013 to 5.9%.” (Stanlib, 2012)

The revised World Economic Outlook Update: New Setbacks, Further Policy Action Needed can be accessed from http://www.imf.org/external/pubs/ft/weo/2012/update/02/.

 

Sluggish growth is being blamed for the gloomy outlook which is expected to lead to a mild recession in the Euro zone, and a slowdown in the rest of the world including the Asia-Pacific region. Also being blamed for the listless growth is a rise in sovereign yields and the deleveraging of bank deficits by companies who are reducing their amount of borrowed capital.

 

Fiscal consolidation is also being blamed on stalling the recovery. Commonly known as austerity measures, a term dreaded by the corporate sector and populace, it has been the cause of large public riots in Spain and Greece. In the short term fiscal consolidation policy implementation is expected to decrease economic confidence further as corporate and individual spenders and investors try to ride out the downturn.

 

Despite this, fiscal consolidation policies are a necessity to relieve imbalances in the economy, reduce budgetary deficits and implement financial reforms to halt the pattern of governments’ accumulation of debt.

 

  

 

 

Stanlib, Economic Focus. (2012). IMF revised down their world growth forecast, including SA, for 2012 and 2013. Retrieved from http://www.stanlib.com/ECONOMICFOCUS/Pages/IMFworldgrowthforecast2012and2013.aspx