The International Monetary Fund - World Economic Outlook?

By: Ian Campbell | Tue, Jul 17, 2012
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Yesterday the International Monetary Fund issued both its 'World Economic Update' and its 'Global Financial Stability Report'. If you read the short Executive Summaries at the beginning of each, you effectively will have read them. That will take you less than 2 minutes in total, and you ought to take the time to do it - see links following this commentary.

Simply put, ask a healthy 35-year-old man to assume:

All in aid of yesterday's International Monetary Fund updates. The IMF in its World Economic Outlook Update says:

As I see things, these may not be 'jump over a 100 foot high fence assumptions', but given all the attendant circumstances they are certainly 'jump over a much higher than 5 foot high fence assumptions'. As a result, I do not place much weight on yesterday's IMF World Economic Outlook.

The IMF's Global Financial Stability Report begins by saying "risks to financial stability have increased since (our) April, 2012 report", and focuses on what the IMF sees as:

An underlying dependence on the European leaders summit agreement being implemented as 'conditionally agreed' and in a 'timely manner' both seem questionable to me.

Because of the importance of all of this, I strongly suggest that if you read this commentary that you read both IMF Executive Summaries - then reach your own conclusions.

Concurrently, in yet another IMF statement, the IMF said that it was now forecasting improved fiscal deficits for Greece, but higher public debt:GDP numbers for this year and 2013 for Greece. This makes sense if the Greek government succeeds in enforcing meaningful austerity measures immediately if not sooner, and in circumstances of what appears to be Greece's continuing drop in GDP.

I generally pay close attention to what is said by Christine Lagarde, the IMF Managing Director. While I understand why the IMF can't come out and say "nothing is happening fast, and as a result the world economic situation, particularly that of the Eurozone and the United States is likely to continue to deteriorate", I am less impressed with yesterday's World Economic Update and Global Financial Stability Report than I am with the typical statements made by Ms. Lagarde.

Topical References: World Economic Outlook Update - New Setbacks, Further Policy Action Needed, from The International Monetary Fund, July 16, 2012 - important reading time 5 minutes (Executive Summary 1 minute); Global Financial Stability Report GFSR Market Update - Intense Financial Risks: Time for Action, from The International Monetary Fund, July 16, 2012 - important reading time 5 minutes (Executive Summary 1 minute); IMF raises its two-year forecast, from Ekathimerini, July 16, 2012 - reading time 1 minute; As IMF trims global growth outlook, Canada continues modest growth, from The Financial Post, Gordon Isfeld, July 16, 2012 - reading time 2 minutes; and IMF cuts global growth forecast, from The Financial Post, from Reuters, Lesley Wroughton, Gordon Isfeld, July 16, 2012 - reading time 2 minutes.



Ian Campbell

Author: Ian Campbell

Ian R. Campbell, FCA, FCBV
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