Five Easy Pieces From The IMF's Latest World Economic Outlook

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Five Easy Pieces

Vincent Reinhart

Vincent Reinhart - Chief Economist & Investment Strategist

The migration of international bureaucrats runs at a quicker pace than the swallows of Capistrano. Twice a year, in association with the Spring and Fall meetings of the International Monetary Fund (IMF) and World Bank, they roost at some global center, such as Istanbul, Tokyo, or Lima. Last week, as is true half the time, their destination was Washington, DC. This means that limousines will be hard to find along the Northeast corridor and there is a lot of data to digest because various reports are released to support the discussion. In particular, the World Economic Outlook (WEO) provides forecasts for 190 economies over the next decade. Point forecasts are mostly overrated, but when enough of them are put together it is possible to discern both general trends expected, as well as the mood, of the international community. And do not discount the IMF staff, who are eminently professional and drawn from the same intellectual gene pool as staff and officials of important central banks and finance ministries. Indeed, there is a revolving door connecting all of those economic policy-making institutions. As a result, there is no better place than the WEO to understand the conventional wisdom.

This note briefly reviews the WEO outlook. It can be brief because the IMF outlook aligns well with the Standish global economic view (as published last month). The global economy muddles along because the bad things we fretted about did not turn about as bad as our three-in-the-morning worries, monetary policy across advanced economies remains historically accommodative, and emerging market economies are steadying along with commodity prices. What is more revealing is the five tone poems about the global outlook played out (not always necessarily intentionally) in the WEO data. In particular:

  • The growth of the longer-term trend of real GDP has slowed across two-thirds of the world’s economies.
  • The momentum of inflation has picked up.
  • The push of low interest rates has sent capital flowing offshore, but mostly to smaller economies.
  • Global finance continues to shrink relative to activity and there is evidence that capital flight has picked up.
  • Economic dispersion has shrunk, with the bad outcomes of global growth pulling to the middle of the pack.

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