Boom Doom Economy: Mild Slowdown of the Global Expansion and Increasing Risks (Video, GDP Charts) *IMF World Economic Outlook Update*

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International Monetary Fund: World Economic Outlook

World Economic Outlook: Mild Slowdown of the Global Expansion, and Increasing Risks

Official Statement by the International Monetary Fund (June 17, 2011) Activity is slowing down temporarily, and downside risks have increased again. The global expansion remains unbalanced. Growth in many advanced economies is still weak, considering the depth of the recession. In addition, the mild slowdown observed in the second quarter of 2011 is not reassuring. Growth in most emerging and developing economies continues to be strong. Overall, the global economy expanded at an annualized rate of 4.3 percent in the first quarter, and forecasts for 2011–12 are broadly unchanged, with offsetting changes across various economies. However, greater-than-anticipated weakness in U.S. activity and renewed financial volatility from concerns about the depth of fiscal challenges in the euro area periphery pose greater downside risks. Risks also draw from persistent fiscal and financial sector imbalances in many advanced economies, while signs of overheating are becoming increasingly apparent in many emerging and developing economies. Strong adjustments - credible and balanced fiscal consolidation and financial sector repair and reform in many advanced economies, and prompter macroeconomic policy tightening and demand rebalancing in many emerging and developing economies - are critical for securing growth and job creation over the medium term.

Key Points of the report are:

■ The global economy has continued to expand

■ Inflation has risen

■ Financial volatility has increased

■ Commodity prices have stabilized
■ Growth will slow temporarily
■ Increasing downside risks
■ Policies need to steer away from unbalanced growth

IMF Says Global Growth Hits Soft Patch But Rebound Expected (June 17, 2011) The IMF's Economic Counsellor Olivier Blanchard says the global economy, hit by slowdowns in Japan and the United States, is expected to reaccelerate in the second half of the year.

IMF: GDP Actual and Projected by Year (Chart) Below are the IMF GDPs Actual and Projected by Year for the World, USA, Euro Area, Japan, and UK. These are annual percentage growth rates. The chart is for 5 years: 2008 actual, 2009 actual, 2010 actual, 2011 projected, and 2012 projected.

IMF: BRIC GDPs Actual and Projected by Year (Chart) Below are the IMF GDPs Actual and Projected by Year for the BRIC countries (Brazil, Russia, India, and China). These are annual percentage growth rates. The chart is for 5 years: 2008 actual, 2009 actual, 2010 actual, 2011 projected, and 2012 projected.

Commentary

The IMF World Economic Outlook June 2011 update continues optimistic in reporting the global recovery will continue and is sustainable. The reconstruction by Japan as a result of the catastrophic earthquake, weakness in the USA economy, and problems in the Euro Area are noted as, "pose greater risks". Important risks to the global recovery by both sovereign debt and financial system problems continue. Additional risks are "risks from overheating" in developing countries, "financial risks rising" in the Euro Area, and "tackling fiscal challenges" in the USA and Japan.

Of interest is the recognition by the IMF, in both this report and the prior reports, that a rebalancing of trade, and currency valuations, is necessary to increase exports from developed nations, in particular the USA. Of course, the developing nations, the export nations, would need to increase imports and/or decrease exports from developed nations in this rebalancing scenario. Developing nations would also need to increase domestic demand to offset this rebalancing, which China is attempting to accomplish. The USA and China trade relationship is a prime example of what the IMF is addressing. However, the issue is not just an adjustment of currency valuations but cost of labor. That is, cheap labor will offset the currency valuation adjustments to some extent.

About the IMF

Overview The International Monetary Fund (IMF) is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

What The IMF promotes international monetary cooperation and exchange rate stability, facilitates the balanced growth of international trade, and provides resources to help members in balance of payments difficulties or to assist with poverty reduction.

Membership The IMF has 187 member countries. It is a specialized agency of the United Nations but has its own charter, governing structure, and finances. Its members are represented through a quota system broadly based on their relative size in the global economy.

How Through its economic surveillance, the IMF keeps track of the economic health of its member countries, alerting them to risks on the horizon and providing policy advice. It also lends to countries in difficulty, and provides technical assistance and training to help countries improve economic management. This work is backed by IMF research and statistics.

Collaboration The IMF works with other international organizations to promote growth and poverty reduction. It also interacts with think tanks, civil society, and the media on a daily basis.

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