On January 21, the International Monetary Fund (IMF) issued a positive update on its World Economic Outlook. In a press conference, Olivier Blanchard (Economic Counsellor and Director of the Research Department) stated the report had three main messages:
- The global economic recovery is strengthening, with accelerating growth in both the developed and emerging economies (see infographic):
- This increase in growth was anticipated. The drag from fiscal consolidation is diminishing; the financial system is slowly healing; uncertainty is decreasing.
- The economic recovery remains relatively weak and uneven, and risks are evident.
For the U.S., the IMF projects a rise in GDP from 1.9% in 2013 to 2.8% in 2014. Blanchard commented:
“U.S. growth appears to us to be increasingly solid. Private demand is strong. As a result of the December budget agreement, fiscal consolidation, which weighted on growth negatively in 2013, will be more limited in 2014.”
The IMF update is good news to global stock market investors. We pointed out in our October 1 and January 1 Outlooks that the world’s stock markets rose every year this century when global GDP growth accelerated. We note that Marietta’s forecast for 2014 global growth is 4.1% and for U.S. growth is 3.0%, and thus we think the IMF is still too conservative and will raise further estimates as the year progresses.