BU Research Blog

Every year at this time (autumn), the IMF holds large international meetings to highlight and discuss the state of the global economy for its members.  The latest sessions, and the World Economic Outlook that supports them, have indicated slower growth this year, averaging 3.1% worldwide – a rate lower than in 2014 (3.4%) and lower than the previous forecast.  Prospects are termed “uneven”, with better numbers for the advanced economies and worse ones for emerging and developing countries.  Within these broad assessments, however, there is a range of projected experience, with commodity producers hurting and consumer orientated economies doing relatively fine.  The IMF concludes, ” In an environment of declining commodity prices, reduced capital flows to emerging markets and pressure on their currencies, and increasing financial market volatility, downside risks to the outlook have risen, particularly for emerging market and developing economies.”

A key issue is how the “Great Recession” has affected the underlying potential to grow in different economies around the world.  There is a debate about whether the 2008-10 drop permanently hurt the global growth rate.  Nothing is ever permanent in global economics but there is probably a case to say that persistent imbalances in trade, investment – real and financial, and productivity are dampening growth prospects.  The sluggish recovery looks set to continue.  In response, the IMF, as it often does, calls for infrastructure spending and continued monetary largesse.  If only it were that simple.