Thursday, September 14, 2006

Conflicting headlines over IMF reports

Wasn't it just the other day that news headlines warned about "global imbalances" and an increasing risk of global recession? Today's news items regarding the IMF's World Economic Outlook report seem to paint a different picture; while the news about risks and imbalances remain, forecasts for continued growth are highlighted in the most recent headlines.

Earlier in the week, news reports of IMF forecasts focused on the risk of a global crash and imbalances that might rock the global economy. On September 13, The Independent Online carried an article headlined, "IMF: risk of global crash is increasing".

That article was based on findings from the IMF's recently issued Global Financial Stability Report, and implied that the risks to the global economy stemmed largely from the possibility of a "US-led" slowdown, rather than global imbalances cited earlier.

The worry over those imbalances were cited in a newspaper article Monday by IMF chief Rodrigo Rato, whose remarks were convered in a September 11 Reuters article entitled, "Global imbalances could cause world recession - IMF".

But the order of the day is the call for higher growth rates in the world economy by IMF economists. From the Sydney Morning Herald's September 15 article, "A golden era for world economy":

WORLD growth will be stronger than expected next year but the threats to the global economy are intensifying, the International Monetary Fund says.

The fund has raised its global economic growth forecast to 5.1 per cent this year and 4.9 per cent in 2007 - both a quarter of a percentage point higher than its previous forecast in April.

"This would be the strongest four-year period of global expansion since the early 1970s," the fund's six-monthly analysis of the world economy released in Singapore yesterday said.

But it also warned the risks to the world economy were "increasingly tilted to the downside" compared with six months ago.

The fund's economists estimate there is a one-in-six chance of world growth slumping to 3.25 per cent or less next year - a significant slowdown compared to the last four years.
Raghuram Rajan, the IMF's research head, described the global economic outlook as "schizophrenic" because the strong forecast was "surrounded by more uncertainty than usual".


Well, whatever you make of those reports, don't let it throw you too much. After all, this is an organization that believes inflation originates from "tight labour and commodity markets", rather than ever-expanding global money and credit supply.

Incidentally, I would note that while protestors are being banned from the site of IMF and World Bank meetings in Singapore, female escorts are welcomed and recruited!