The New Mediocre

IMF cuts growth forecasts

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What's going on?

On Tuesday, the International Monetary Fund (IMF – a sort of bank for countries) cut its global economic growth forecasts to the lowest level since the 2008 financial crisis.

What does this mean?

The IMF expects the global economy to grow 3.3% this year, down from its 3.5% January forecast. It partly blamed the eurozone: the IMF now foresees 0.3% less growth there. Europe’s economic powerhouse, Germany, bore the deepest scars. Last year’s “temporary” disruptions to its crucial auto industry now appear more permanent, thanks to new diesel emissions regulations and weakening demand from China.

The IMF trimmed its US growth prediction too, reflecting the government shutdown through January and, perhaps linked, lower-than-expected public spending. But unchanging interest rates this year should should mean the US is once again the world’s fastest-growing developed market this year.

Why should I care?

The bigger picture: Trade warriors on tour.

The key for US growth this year probably lies in trade – and not just with China. Last year’s new trade agreement between the US, Mexico, and Canada hasn’t been signed off by the US yet – and its failure to do so could prompt yet more tariffs between the countries. What’s more, the US threatened Europe with new tariffs on $11 billion worth of products on Tuesday – and Europe’s planned retaliation won’t be pretty, crimping company profits and therefore economic growth.

Zooming out: As Europe wanes, Africa waxes.

The World Bank cut its forecasts for sub-Saharan African economies’ growth this week, but expects a recovery soon, thanks to the rising prices of the commodities that underpin several of them (tweet this). In Europe, recovery’s less certain: growth in demand for loans from eurozone businesses slowed to a halt last quarter despite still-low interest rates. That suggests a continent without the will to invest for the future, which typically presages flagging economic growth.

Originally posted as part of the Finimize daily email.

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