Where Global Growth Is Expected – International Update

Aug 19, 2013 | by Franck Cushner, CFP®

The IMF released its World Economic Outlook on July 9th, with growth estimates and projections for 2014.  The report expects that growth in imports and exports internationally will be driven by emerging & developing economies throughout 2014. The IMF anticipates the United States to grow at a rate of 2.7%, exceeding growth forecasts for Europe and Japan. The projection assumes that the sequester which became effective January 2013, will remain in place until 2014, and that private sector demand will remain solid.

Inflationary pressures are expected in the emerging markets as consumer prices are expected to increase 5.5% versus a 1.9% increase with the advanced economies.

Historically, emerging market growth is what has driven world growth for the past four decades, primarily due to demographics and improved living standards. Emerging and developing economies have an overall younger population, thus providing employable workers and avid consumers. As the average age of more developed economies such as Japan and the U.K. have become older, fewer workers are available and consumption decreases.

A protracted recession in the euro area has hindered the region’s growth and impeded it from expanding as much as other regions worldwide.

The IMF report expects that the slowdown with commodity exporting economies such as Australia, Brazil, and Russia has been due to recent deterioration of commodity prices.

In addition, growth in various economies in the Middle East and North Africa have become more vulnerable to political and economic transitions, yet still have the demographical characteristics to produce growth.

The IMF has expressed concern with both monetary & fiscal policy in the United States. It believes that as the central bank of the United States begins its unwinding of monetary policy stimulus, it may lead to slowing credit and tighter financial conditions worldwide. It also suggests that any delay in increasing the U.S. debt ceiling this fall may be consequential to international financial markets.

Sources:            World Economic Outlook July 2013 Release, IMF

Accompanying Charts:    Import/Export Growth, IMF Projections

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