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Global Growth Prospects Revised Downward

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By Wayne Curtis

Disturbing news has surfaced as international financial turbulence continues. The International Monetary Fund (IMF) recently revised its forecast of economic growth downward for 2016. IMF is an international organization of 188 countries working to foster global monetary cooperation, facilitate international trade, and promote high employment and sustainable economic growth around the world.

IMF made separate forecasts for the advanced economies and the emerging and developing ones. While world output is estimated to grow by 3.4 percent, growth in the developed economies is projected to rise by a mere 2.1 percent.

Within the developed nations, the United States and Spain are expected to have the highest rates of growth at 2.6 percent and 2.7 percent, respectively. As odd as it seems given its recent struggles, Spain is the shining light of Europe. Other nations in the Euro area will experience sub-par growth rates of less than 2.0 percent. Germany, the linchpin of Europe, is projected to grow 1.7 percent and France and Italy only 1.3 percent.

Among other advanced nations, only the United Kingdom is expected to grow in excess of 2 percent (2.2 percent).  Canada and Japan are projected to increase at 1.7 percent and 1.0 percent, respectively.

Based on the slow growth of the advanced nations, it is apparent that international economic growth will rest with the emerging and developing economies.  An exception is Russia, where low oil prices and an ongoing recession will stymie growth, estimated at -1.0 percent.

India and China are the primary growth areas in the developing world. The former is expected to expand by a robust 7.5 percent and the latter, despite its current economic and financial struggles, 6.3 percent.  China, however, could be revised downward if conditions worsen.

The economies of Latin America and the Caribbean are expected to contract.  The big loser is Brazil, replete with economic and political strife, at -3.5 percent. Mexico, the exception, is forecast to expand by 2.6 percent.

The Middle East will be a growth area. IMF estimates the entire region will reach 3.6 percent during the year. But lower oil prices, coupled with heightened tensions and ongoing strife, may reduce the rate.

If they are accurate, what do the forecasts mean for us? Minimal growth in the developed nations could slow the pace of recovery in this country and delay future interest hikes by the Federal Reserve.

Wayne Curtis, former superintendent of Alabama banks, is a retired Troy University business school dean. Email him at wccurtis39@gmail.com.