IMF: “A DANGEROUS NEW PHASE” FOR GLOBAL GROWTH

The latest IMF Survey shows a slowing global economy that has entered a “dangerous new phase”. They say global growth is stalling due to multiple shocks combined with insufficient rebalancing (via Reuters Counterparties):

• Global growth forecast to moderate to 4 percent in 2011 and 2012
• Advanced economies facing anemic growth of only 1.6 percent in 2011
• Multiple shocks combined with insufficient rebalancing stalling recovery

Some highlights from the report:

“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,”

“…Strong policies are urgently needed to improve the outlook and to reduce the risks,” said IMF Chief Economist Olivier Blanchard. “Only if governments move decisively on fiscal policy, financial repairs, and external rebalancing, can we hope for stronger and more robust recovery.”

“…First, to achieve internal rebalancing, private demand has to take over from government stimulus. Despite considerable progress on this front in many countries, the major advanced economies lag behind. Reasons vary by country but tight bank lending, repercussions from the housing boom, and high household indebtedness are all putting stronger brakes on the recovery than expected.”

…”Second, countries with large external surpluses must achieve more domestically driven growth, while those with large deficits, most notably the United States, must do the opposite. This is not happening. While imbalances did fall during the crisis, that was due to the large decrease in demand for imports in advanced economies relative to precrisis trends, rather than an increase in imports by emerging economies with external surpluses. Now the forecast is for an increase rather than a decrease in imbalances.”

You can read more here.

Source: IMF