São Paulo – The International Monetary Fund (IMF) has revised down its expectations for growth of the global economy in 2012 and 2013. According to the update of report World Economic Outlook, disclosed on Tuesday (24), the Fund forecasts expansion of 3.3% this year and 3.9% next year, with reduction of 0.7% and 0.6%, respectively, as against the study published in September 2011.
According to the document, the recovery of the global economy is threatened by the crisis in the Euro Zone and by “fragilities” elsewhere. The lower estimates, according to the IMF, were mainly due to the fact that the Euro Zone is expected to experience a mild recession due to the rise in sovereign yields, bank deleveraging and fiscal consolidation.
“Forecasted growth is mediocre and could be even worse,” said the director of the IMF Research Department, Olivier Blanchard, in an interview posted on the institution’s site. He mentioned “fiscal consolidation” and “bank deleveraging” as the two main bars to economic growth, the former as it implies in greater tax and lower public spending and the latter as it means less credit on the market.
Estimates for developed markets are worse than those for emerging nations, although the latter will also face the crisis. The forecasted growth for the United States, Euro Zone, United Kingdom and Japan is 1.2% in 2012 and 1.9% in 2013. For the block of developing nations the projection is for growth of 5.4% this year and 5.9% next year, below the 7.3% of 2010 and 6.2% in 2011.
“Emerging nations are already feeling the crisis, we may see this by [the flow of] trade,” said Blanchard. What happens is that low economic activity in developed nations inhibits exports from developing nations and also the flow of capital. “It [the deceleration of emerging nations] will not be catastrophic, but will take place,” added the economist.
In the case of Brazil, the IMF hopes for growth of 3% this year and 4% next year. Projections were reduced by 0.6% and 0.2%, respectively.
In the Middle East and North Africa, in turn, expectations are for acceleration in 2012 and 2013, mainly due to the recovery of Libya, whose economy shrank last year due to the civil conflict that ousted the Muammar Kadafi regime, and to the continued “strong performance” of oil exporters.
The Fund points out, however, that the Arab countries that are importers of oil will have low growth due to the political transition processes in some and to the adverse foreign scenery.
To the IMF, the average price of oil should remain at US$ 99 per barrel this year, as against US$ 104 in 2011. The value of other commodities, however, should drop 14% in 2012. Although this is not good news for the countries that export these products, like Brazil, the report evaluates that there should be lower inflationary pressure around the world.
In general lines, the fund recipe to minimize economic problems in 2012 is to tread lightly with regard to fiscal adjustment and credit restriction. To the European Central Bank, the IMF suggests greater liquidity in the financial system and lower interest rates. To the US and Japan, the recommendation is formulation of policies to bring debt to “sustainable” levels and thus create conditions for growth and job generation. In the emerging economies, mechanisms should be established to guarantee domestic demand, compensate the foreign contraction and deal with the volatile flow of capitals.
*Translated by Mark Ament
