11 Economies Worse Off than U.S.

When times are tough, one thing that tends to raise the spirits is knowing that somebody else has it worse. And as wretched as the U.S. economy seems, it's not as bad as in other regions.

The International Monetary Fund's latest tally of world economic conditions forecasts a 2.6 decline in U.S. economic output for all of 2009, and anemic growth of 0.8 percent in 2010. That's more optimistic than the IMF's prediction from three months ago, but those are still lousy numbers. A weak economy throughout 2010 would mean a bleak employment picture, an agonizingly slow housing recovery, and another year or two likely to feel like a recession, whether it's technically labeled that or not.

We should count ourselves lucky, though. The IMF expects at least 11 major parts of the world to have more severe economic contractions than the United State this year, including most of western Europe, Japan, Russia, and Mexico. Europe will still be stumbling along behind the United States next year, as well. Here are the IMF's projections for economic growth in various parts of the world:

	2009	2010
China	7.5	8.5
India	5.4	6.5
Middle East	2.0	3.7
Africa	1.8	4.7
Brazil	-1.3	2.5
World total	-1.4	2.5
Canada	-2.3	1.6
U.S.	-2.6	0.8
France	-3.0	0.4
Spain	-4.0	-0.8
U.K.	-4.2	0.2
European Union	-4.7	-0.1
Central/Eastern Europe	-5.0	1.0
Italy	-5.1	-0.1
Japan	-6.0	1.7
Germany	-6.2	-0.6
Russia	-6.5	1.5
Mexico	-7.3	3.0

If these projections come true, it means the United States, despite its overspent consumers, wrecked banks, and insolvent automakers, will be leading the world economy out of recession. Somehow. The developing world will help, but those high growth projections in China and India can be deceiving. China in particular has government policies that practically mandate high growth, and 8.5 percent in 2010 would be just about the bare minimum to keep employment at tolerable levels. And neither China nor India is a major buyer of American-made goods and services; for the most part, it's the other way around. With much of the developed world trailing the United States, it will take American consumers to ratchet up demand for the world's products. Scary thought.

The IMF does offer a bit of more heartening news: The global wipeout finally seems to be receding. "The world economy is stabilizing," the IMF reports. Its global economic growth projection of 2.5 percent in 2010 is 0.6 points higher than predicted in April. But the global economy isn't expected to gain its footing in earnest until the second half of 2010. Maybe by then American spenders will have come out of hiding.

Disclosure: no positions

Comments

[John Galt:]

Misery loves company.

Jul 10 05:01 PM

[Dave Wrixon:]

No, you are totally wrong.

The worst off are those that are actually more indebted than yourselves. That is a pretty elite club, if elite is correct term.

The IMF is actually pretty clueless, and what have hear represents a scale of honesty rather than performance. The Europeans, Japanese are being told the truth. That will actually help them get out of this mess.

Jul 10 05:52 PM

[Moon Kil Woong:]

Their 2010 numbers seem very off. Also, what happened to all the 3rd world countries? If you want to see carnage try owning some of their assets.

By the way, to explain how rosy things are, China failed for the second time to raise money at its own Treasury Bond auction and had to revert to selling 1 year bonds.

What does it mean when the US has to raise US Treasury bonds and sell them to foreign governments like China who can't raise money themselves through issuing their own Yuan Treasury bonds themselves. It really makes you wonder. For some odd reason Chinese buyers are scared of asset bubbles and inflationary pressure themselves. Hmmmm.... And they predict China will help lead the recovery?

My question is if China and the US will lead the recovery in 2010, on who's money? And will we be able to call it a recovery or just stagflation? Printing money and expanding your primary money supply has never been a viable economic solution even though not for want of governments wanting to do this (In our case we already tried it). That's why governments tend to avoid this avenue. The results are that it stamps a giant "Loser" mark on their central bank's foreheads for everyone to see.

Jul 10 11:20 PM

[johngonole:]

I'll admit I don't know much at all about the state of foreign economies. But is seems to me the US is always carrying the burden of leading the World economy out of recession, etc... We have done this time and time again by basically spending more than we make. During boom times the consumer does this. During hard times our government does it. The only constant is that as a country we are going deeper and deeper into debt.

Other economies seem totally dependent on ours. Are they further in debt than we are or are they all misers who just never spend anything? Or has their governments misallocated assets much worse than our government does?

It seems to me that free markets need to be accepted more around the world and soon because the US can't increase its debt load much more when one considered the impending medicare crisis and mass baby boomer retirement. Other countries are going to have to at some point develope their own disposable income in order for the world economy to become more stable.

I won't even discuss the failure of paper money monetary policies.

Jul 11 02:34 AM

[Dave Wrixon:]

Well, that is it. Just console yourselves on the fact that you only got into this mess trying to help other people. Get a life!

And don't worry about it happening again. You cannot tow anything with gas in the tank.


On Jul 11 02:34 AM johngonole wrote:

> I'll admit I don't know much at all about the state of foreign economies.
> But is seems to me the US is always carrying the burden of leading
> the World economy out of recession, etc... We have done this time
> and time again by basically spending more than we make. During boom
> times the consumer does this. During hard times our government does
> it. The only constant is that as a country we are going deeper and
> deeper into debt.
>
> Other economies seem totally dependent on ours. Are they further
> in debt than we are or are they all misers who just never spend anything?
> Or has their governments misallocated assets much worse than our
> government does?
>
> It seems to me that free markets need to be accepted more around
> the world and soon because the US can't increase its debt load much
> more when one considered the impending medicare crisis and mass baby
> boomer retirement. Other countries are going to have to at some
> point develope their own disposable income in order for the world
> economy to become more stable.
>
> I won't even discuss the failure of paper money monetary policies.

Jul 11 05:31 AM

[Ferdinand E...:]

Well, I have encountered the economists of the IMF on several occasions, though not recently, and if I remember correctly I described them to Ms Banks as 'all-out ignoramuses'. However, if they are even partially correct about the signs of growth rates in 2010 plusses instead of minuses), then we are on our way out of this mess.

Jul 11 09:20 AM

[Old Trader:]

If one accepts the premise of "first in, first out", its not a giant leap of faith to see the US being the first to "crawl out of the pit" (note: the word "rebound" was NOT used, since the word implies a degree of vigor that I suspect will be lacking in any "recovery", whenever it arrives).

Jul 11 09:36 AM

[Gregman2:]

It would seem that those countries with commodity resources will tend to do well in 2010. The oil countries are healthy and those with low public debt. (These IMF numbers differ from others I've seen elsewhere.)

Jul 11 11:26 AM

[David Roskoph:]

The longer my teeth get, the more it seems that not only the US but the world is driven by America's middle class. They produce, consume and give better than any species on Earth. Every other country tries to clone them but so far, they remain unique.

Then the issue becomes how to tap them out while not reducing thier productivity. It's a three way battle between taxes, energy and debt; each placating one of the tree groups that runs the show. If any of the three gets too greedy, they'll break the back of the engine that determines the fate of global capitalism.

Although we are mathematically bankrupt now, our middle class remains the best show on Earth. Despite our subprime foray, we will ressurect the world we almost felled - starting now. It's strictly a matter of franchise value and we have no cogent competition.

Jul 11 12:54 PM