The World Economic Outlook: The pendulum swings

Posted: April 14, 2015 in economy
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THE International Monetary Fund has just released its World Economic Outlook, a biannual health-check on the world economy. Americans will not be delighted with what they see. Back in January the IMF expected America to grow by 3.6% this year; now it is expecting 3.1% (see chart). These data continue a run of bad form for the world’s biggest economy, which we discuss in detail in this week’s issue. Problems are legion. Thanks to the strong dollar, exports are falling. That is eating into corporate profits, which fell by 1.6% in the fourth quarter of 2014 and were 6.4% lower than in the same quarter of 2013. Investment is not doing well either, as energy producers hold back in the hope of higher prices.

But there is better news elsewhere: the euro zone is doing badly, but things have improved. The IMF has upgraded its growth forecasts for the zone by 0.3%, and 0.5% for Spain, one of the hardest-hit countries. The weak euro and low oil prices are proving an economic boon, it seems. Quantitative easing, which began in March, has boosted equity and bond markets. However, the euro-zone upturn should not be mistaken for a renaissance. Neither France, the second-biggest economy in the currency bloc, nor Italy, the third-biggest, is expected to muster growth above 1% this year. The longer-term prospects are even worse.&nbsp;The IMF also pours some cold water on the euphoria that …<div class="og_rss_groups"></div>

via Economic Crisis


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