The International Monetary Fund (IMF) has released its newest forecasts for global growth in its World Economic Outlook (WEO), and the expectation is that emerging markets are going to lead to even slower global growth ahead in 2013. It seemed almost odd that the IMF was specific to say that its projection in 2013 is unchanged from 2012 at just over 3%, but there is no fighting the fact that this forecast is lower than its April one. Having the title “Emerging Market Slowdown Adds to Global Economy Pains” states only part of the problem.
The main findings show that weakness in emerging market economies will act as a drag on the global growth prospects and that the risks to growth remain low in advanced economies but are more worrying in emerging markets. Global growth is now projected at 3.1% for 2013 and 3.8% for 2014. Prior projections were one-quarter of a percentage point higher in the April 2013 WEO.
Global growth barely rose in the first quarter of 2013, instead of accelerating further as expected at the time of the April 2013 WEO. Key findings are as follows:
- Disappointments in major emerging market economies
- A deeper recession in the euro area
- Slower U.S. expansion than expected
- Growth was stronger than expected in Japan
GDP growth in the United States is projected to rise from 1.75% in 2013 to 2.75% in 2014. Japan’s growth in 2013 is now expected to be 2.0% rather than 1.5% previously projected for 2013.
Europe remains a significant drag here. The euro area is forecast to remain in recession in 2013, before growing again in 2014. Factors cited are low demand, depressed confidence, financial market fragmentation, weak balance sheets and fiscal consolidation.
Emerging markets and developing economies are now expected to generate growth of 5.0% in 2013 and about 5.5% in 2014. Both figures are about 0.25% lower than the April WEO. Factors cited are infrastructure bottlenecks and other capacity constraints, lower export growth, lower commodity prices, financial stability concerns and, in some cases, weaker monetary policy support. China growth is now projected to be 7.75% in 2013 to 2014, which are down 0.25% in 2013 and 0.5% in 2014.
The IMF said:
Weaker growth prospects in emerging markets and new risks worldwide are challenging global growth, employment, and rebalancing. The report underscores the need for policymakers everywhere to increase efforts to address these challenges and restore robust growth. … Finally, there is a need for structural reforms across all major economies, to lift global growth and support global rebalancing.