Research Dept. News
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Monthly Report, num 350 - October 2011
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International review - IMF forecasts
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IMF forecasts: risk of a double dip recession
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The IMF expects 4.0% world growth for 2011 and 2012, with a significant risk of this being lower.
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In its World Economic Outlook for September, the International Monetary Fund (IMF) sees a weaker and more uncertain recovery, with greater fiscal and financial risks for advanced economies. Global growth for 2011 has been reduced to 4.0%, a rate that will not vary in 2012, clearly below July's forecasts. The recovery is uneven, with some advanced economies that, according to the Fund, will grow less than 2.0% in 2011 and 2012 and with some emerging economies for which, although their growth has also been revised downwards, the risk of a slowdown is less, with advances that will probably exceed 6.0% this year and the next.
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Private demand still fails to take over from public stimuli in advanced economies.
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According to the IMF, the world economy is being afflicted by a twofold imbalance, internal and external. With regard to the former, it's vital for private demand to take over from fiscal stimuli, which is not happening in advanced economies because of a shortage of credit and the legacy of real estate bubbles. With regard to the external imbalance, while advanced economies such as the United States have to correct their trade deficits and increase their exports, emerging economies such as China need to focus on strengthening their domestic demand to reduce external surpluses.
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The United States' growth is revised downwards to 1.5% in 2011 and 1.8% in 2012.
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The risks are likely to reduce growth. The main risk is the European sovereign debt crisis spiralling out of control. Fiscal and financial uncertainty is affecting countries such as the United States and Japan, with low growth prospects that foster doubts regarding the sustainability of their debt. In this respect, the Fund wants advanced economies, particularly the United States, to strike a prudent balance between stimuli for demand and a credible medium-term fiscal consolidation plan that ensures the sustainability of the public accounts.
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The economy whose growth has been revised downwards the most is the United States. The lack of political consensus, persistently weak employment and housing and the danger of excessive reticence on the part of consumers mean that, although greater growth is expected for the second half of the year, the advance forecast for the whole of 2011 remains at a meagre 1.5%, with 1.8% expected for 2012.
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The euro area slows up. Germany, strong in 2011, will lose speed in 2012. Spain grows by 0.8% in 2011 and 1.1% in 2012.
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For its part, the euro area expects to grow by 1.6% in 2011, but in 2012 a slowdown is forecast with 1.1% growth. Expectations for Germany have also cooled down, with growth forecast at 2.7% for 2011, which should slow up to 1.3% in 2012. For Spain, the forecast of 0.8% growth in 2011 has been maintained. However, in 2012 the recovery will be more lukewarm than expected, with 1.1% growth forecast due to lower demand on the part of its trading partners.
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Japan recovers from its earthquake while China and emerging Asia continue to lead world growth.
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Japan should fall to 0.5% in 2011 but reconstruction after the effects of the earthquake and tsunami should raise growth to 2.3% in 2012. The outlook for emerging economies is still robust, particularly East Asia with the outstanding example being China's growth which, according to the IMF, will remain strong and advance by 9.5% in 2011 and 9.0% in 2012, while the economies of Eastern Europe and Latin America will continue to grow but somewhat less than the Asian countries. Similarly, inflationary risks should be eased by less upward pressure from commodity prices.
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