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Stall speed approaching

Published Monday, October 12th, 2015

“Six years after the world economy emerged from its broadest and deepest post war recession, the holy grail of robust and synchronised global expansion remains elusive” warns the IMF chief economist in presenting the organisation’s latest forecasts before this weekend’s annual meeting in Lima. “Moreover downside risks to the world economy appear more pronounced than they did just a few months ago” and 2015 will be the fifth successive year of declining growth in the world economy.

If emerging economies continue to falter there is a risk of “near stagnation in advanced economies”. At a forecast growth rate of 3.1% and with significant downside risk the global economy is “close to stall speed”. This is not the IMF’s base case scenario but it is a scenario it claims which “does not rely on extreme assumptions alone”.

Why is the IMF so gloomy? Is it a case of not wanting to be caught out and making sure that they forecast ten of the next two recessions? High commodity prices were supposed to be endangering global growth. Now we have low commodity prices and global growth is deteriorating, despite being accompanied by a long period of the most benign monetary policy in living memory. The world economy will grow this year at its slowest rate since the financial crisis and in dollar terms is on track to contract by more than the $3.3 tn contraction of 2009.

to read the rest of the report, please click here

Posted by David Hufton