IMF Cuts Global Economic Outlook; Reduces Asia Forecast

Tom Burroughes

9 October 2013

The International Monetary Fund has reduced its global outlook on economic output this year to 2.9 per cent, down 0.3 per cent from its forecast in July, and also cut its forecast for 2014, as it estimated how the world will cope with the end of money-printing by the US Federal Reserve.

In Asia, the IMF cut its forecast on China in 2013 to 7.6 per cent, and on 2014, to 7.3 per cent. It cut the forecast for GDP on the ASEAN-5 region to 5.0 per cent this year and 5.4 per cent in the next year.

The Update. This is partly due to a natural cooling in growth following the stimulus-driven surge in activity after the Great Recession. Structural bottlenecks in infrastructure, labor markets, and investment have also contributed to slowdown in many emerging markets,” the IMF said.

“This transition is leading to tensions, with emerging market economies facing both the challenge of slowing growth and changing global financial conditions,” said Olivier Blanchard, the IMF’s chief economist and head of the Research Department.

Overall, growth in emerging market and developing economies is expected to remain strong at 4.5–5 per cent in 2013–14, supported by solid domestic demand, recovering exports, and supportive fiscal, monetary and financial conditions. Commodity prices will continue to boost growth in many low-income countries, including those in sub-Saharan Africa. But economies in the Middle East and North Africa, Afghanistan, and Pakistan region will continue to struggle with difficult economic and political transitions,” it added.