Thursday, January 28, 2010

Stronger Global Growth Expected

On January 26, the International Monetary Fund (IMF) hiked its 2010 global GDP forecast from 3.25% as of last October to 3.9%. This projection is now above our year-end forecast of 3.5%, which in turn is slightly above the 3.2% year –end estimate issued by The Economist. The IMF continues to endorse the consensus view that 2010 growth will be driven by the emerging and developing economies (+6.0%, with a further acceleration to 6.3% in 2011), whereas the advanced economies will remain sluggish (2.1% in 2010, with a rise to 2.4% in 2011).

The IMF’s revised 2010 growth projections for individual countries are close to those in our January 4, 2010 Outlook.

Source: IMF staff estimates; www.imf.org

 

The IMF report is in many respects encouraging:  economies are accelerating more quickly than expected, equity markets have recovered faster than expected, stability has been restored to credit markets and commodity prices have rebounded. A possible concern lies in the IMF’s 2010 inflation forecast:  an expected inflation rate of 1.3% in the advanced economies will provide central banks in these countries with considerable flexibility is setting monetary policy, but the 6.2% forecast in the emerging and developing economies may trigger restrictive policies.
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