The US-based International Monetary Fund has just delivered its latest assessment of the health of the global economy – and the prognosis is that things are getting (slowly) better. It’s now predicting a 1.4% global contraction this year, followed by growth of 2.5% in 2010, thanks largely to India and China. As for the UK, it’s got gloomier about this year’s prospects, nudging its forecast down to -4.2%. But it’s more optimistic about next year: rather than a 0.4% decline, it’s now expecting 0.2% growth. Try not to get too over-excited…
The positive news is that the IMF’s latest World Economic Outlook was a bit cheerier than last time round: ‘The world economy is stabilising, helped by unprecedented macroeconomic and financial policy support’. That’s IMF-speak for the huge sums of money governments around the world have been throwing at the problem. But with the financial sector still so heavily dependent on taxpayers’ cash, apparently we can’t yet consign the dreaded r-word to the dustbin of history. The recession 'is not over’ and the recovery is likely to be ‘sluggish’ at best, the report warned. Boo.
In truth, the outlook doesn't look that great for the UK, even though Gordon Brown and Alistair Darling may have got all excited about the ‘return to growth’ stuff. Since the UK has thrown more money than most at the financial sector, next year’s ‘recovery’ is likely to be pretty weedy. Indeed, 0.2% is a long way behind the 1-1.5% that Alistair Darling is hoping for in the run-up to the General Election.
And today's news that the Bank of England is likely to spend another £25bn on quantitative easing also suggests that there's a way to go yet. In little more than a fortnight from now, the Bank will have dropped a whopping £125bn on propping up the money supply so far this year, but it may yet decide to raise that to a nice round £150bn.
Still, at least the PM can say we’re better off than Europe – due to the continuing travails of Germany this year and next, the IMF is forecasting a 0.3% contraction for the eurozone as a whole in 2010.
What’s pretty clear from these IMF figures is that India and China are going to be the real engine of growth for the world economy in the next couple of years – they’re supposedly going to be expanding at 6.5% and 8.5% respectively in 2010, which only serves to highlight how feeble the West’s recovery will be. Although given that Chinese premier Hu Jintao has just flown home from the G8 meeting in Italy to deal with the riots in Xinjiang, difficult times are likely to be ahead there too...
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