IMF Expects Mild Global Slowdown Followed by Strong Rebound

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 |  Includes: ACWI, EFA
by: Mark J. Perry

IMF--Global growth is projected to slow to 3.73% in 2008, ½% lower than at the time of the January World Economic Outlook Update and 1¼% lower than the 4.94% growth recorded in 2007. Moreover, growth is projected to remain broadly unchanged in 2009 (see chart above). The U.S. economy will tip into a mild recession in 2008 as the result of mutually reinforcing cycles in the housing and financial markets, before starting a modest recovery in 2009 as balance sheet problems in financial institutions are slowly resolved.

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Note: The IMF is predicting U.S. real GDP to grow at .50% in 2008 and .60% in 2009, and is predicting a mild slowdown in world real GDP growth in 2008 (3.73%) and 2009 (3.76%), with a strong rebound to about 5% world growth in 2010-2013 (data here). Even a global "slowdown" to 3.7-3.8% in 2008-09 would still be above the average world GDP growth since 1980 of 3.53%, and would be far above (more than double) the world GDP average growth of only about 1.6% during the last four U.S. recessions (see dark shaded areas above).

If there is a global slowdown and a recession in the U.S. this year, it will potentially be relatively mild compared to previous slowdowns/recessions, and strong economic growth in the U.S. and world will resume shortly. Perhaps a stronger, more stable global economy, with significant growth in emerging economies will help prevent long, deep recessions in the U.S.?