IMF us usually the last to adjust it forecasts closer to reality. Historically its forecasts beyond 6 months are wrong and always biased on the upside. Thus, I ignore them. But the 3 to 6 months ahead are fairly close to final outcome.
In the latest WEO published today IMF estimates lower world economy GDP growth for 2012 by 0.2% to 3.3%. The revision comes from lower growth in Advanced economies by 0.1% and by 0.3% in the Emerging Economies. Historically it was the Advanced Economies that matter but things are changing fast.
The first graph ( annual percentage growth) shows how until 2000 EE and AE grew at a similar pace. Starting with 2000 EE picked up the pacem, however, and during the global crisis which started in 2007 it remained in positive territory.
The other important development is the increase of EE output share of the World output (next graph). At the current pace in few years half of the world output will be produced by EE. Thus, soon the interest rated decisions of Brazil, South Korea, Singapore, China, South Africa, Chile etc will be more or at least as important as the ones of US, EA or UK.
Third important observation is captured by the following graph (public deficit as percentage of GDP). It clearly shows that fiscal consolidation pays off and does deliver higher rates of economic growth. Fiscal consolidation is one of the main reasons behind the impressive pick up in economic growth after 2000 observed in EE.
Fourth, the future looks much,much brighter for EE in terms of economic growth (next graph, percentage of GDP). High public debt will weigh on the AE economic growth in the following decades. Going forward we should expect EE to grow much faster towards the potential level and also to see jumps in the potential economic growth level as the public debt as percentage of GDP will fall further.
In the same time it is true that EE desperately need to grow faster as in those countries live a twice the number of people that live in AE.
Source: IMF and florincituadvisory srl (www.florincituadvisory.com)