Tuesday, September 20, 2011
IMF's 'dangerous' 4% growth
Posted by David Smith at 06:00 PM
Category: Thoughts and responses

On the face of it 4% growth this year and next, three years after the West's banking system almost failed, is what sports commentators would call "a result". That is what the International Monetary Fund is predicting, yet its World Economic Outlook is full of warnings.

4% growth is roughly in line with the global trend and a very long way from recession. “The global economy is in a dangerous new phase. Global activity has weakened and become more uneven, confidence has fallen sharply recently, and downside risks are growing,” the IMF says.

Why the worry? All the usual reasons - the eurozone crisis, weak banks, a very slow US recovery by historical standards, and so on. But mainly because growth is so lopsided. Advanced economy growth is predicted to be 1.6% this year, 1.9% next, downgraded by 0.6 and 0.7 points respectively.

Emerging economy growth is also revised down, but only slightly. This year's 6.4% and next year's 6.1% are trimmed by 0.2 and 0.3 points respectively. China is put at 9.5% and 9.1%, India 7.8% and 7.5%. These are huge differences in performance between the advanced and emerging world. Are they sustainable?

Inevitably, all the attention will be on the UK forecast, 1.1% this year and 1.6% next, with a warning that the deficit reduction programme may have to be adjusted if growth is slower than this. Britain is in the pack of slow growing economiies. The World Economic Outlook is here.