IMF - British economy leading the Group of 7
Discussion
Downwards that is...
IMF expects G-7 growth to grind to a halt
Bloomberg NewsPublished: January 28, 2009
WASHINGTON: The global economy will slow close to a halt this year as more than $2 trillion of bad assets in the United States help sink economies from Russia to Britain, the International Monetary Fund said Wednesday.
Bank losses worldwide from toxic U.S. assets may reach $2.2 trillion, the IMF said in a report, more than the $1.4 trillion that the fund predicted in October. World growth will be 0.5 percent this year, the weakest postwar pace, the fund said in a separate report.
The reports signal that write-downs and losses at banks totaling $1.1 trillion so far are only half of what's to come and that already contracting economies may worsen. Advanced and developing countries need to be "even more supportive" of demand than they already have been, with lower interest rates and fiscal stimulus, the lender said.
"Unless stronger financial strains and uncertainties are forcefully addressed, the pernicious feedback loop between real activity and financial markets will intensify, leading to even more toxic effects on global growth," the IMF said.
The IMF's latest forecast revises its estimate of world growth down from 2.2 percent in November.
Finance chiefs diverge on how to strengthen the rulesEuropean stocks climb on upbeat earningsSantander offers compensation to some Madoff-linked clientsU.S. gross domestic product will contract 1.6 percent, Japan's will shrink 2.6 percent and the euro area will decline 2 percent in 2009, the IMF said. The fund in November foresaw a 0.7 percent U.S. contraction, with declines of 0.2 percent in Japan and 0.5 percent in the euro zone.
Leading the Group of 7 nations in contraction this year will be the British economy, which the IMF predicted would slide 2.8 percent, compared with fund's forecast in November for a 1.3 percent drop.
"This is an extremely severe downward revision," said Simon Johnson, the IMF's chief economist until August 2008 and now a senior fellow at Washington's Peterson Institute, before the report.
In the United States, President Barack Obama is negotiating with Congress plans for $825 billion in tax cuts and spending projects to pull the world's largest economy out of a 13-month recession.
The Federal Reserve meets Wednesday in Washington to decide how to use emergency credit programs, rather than interest rates, to arrest the financial crisis.
The European Central Bank has cut its benchmark interest rate by more than half since early October to 2 percent, matching a record low. Governments are also beginning to ease fiscal policy as the 16-nation euro-region suffers its worst recession since the single currency began trading a decade ago
The fund urged "timely" passage of fiscal aid, saying "any delays will likely worsen growth prospects."
The Obama administration and federal regulators are considering setting up a "bad bank" that would absorb illiquid assets from otherwise healthy financial firms.
The IMF said "the restructuring process might involve the use of a publicly owned bad bank' to remove distressed assets from the balance sheets of institutions." Governments should "move expeditiously toward recapitalization" and disposal of bad debt, the IMF said.
The fund said that banks needed at least $500 billion of new cash "just to prevent their capital position from deteriorating further."
Hedge funds may have halved in size in the last three months of 2008, the fund said, dragged down by a combination of asset-price declines and investors withdrawing their money. Such a decline was "a particular concern for those markets in which hedge funds provided a significant proportion of market trading liquidity," the IMF said.
"Downside risks continue to dominate, as the scale and scope of the current financial crisis have taken the global economy into uncharted waters," the report said. "A sustained economic recovery will not be possible until the financial sector's functionality is restored and credit markets are unclogged."
China's economy will likely expand 6.7 percent this year, the IMF, reducing its estimate for the world's fastest-growing major economy from 8.5 percent in November. Russia will contact 0.7 percent this year, compared with a 3.5 percent expansion the IMF predicted in November, today's report showed.
The IMF report said inflation in advanced economies may fall to a record low of 0.3 percent this year, from a prediction in November of 3.6 percent. The average price of oil may be $50 a barrel this year, the IMF said, less than the $68 a barrel forecast it made three months ago.
http://www.iht.com/articles/2009/01/28/business/28...
IMF expects G-7 growth to grind to a halt
Bloomberg NewsPublished: January 28, 2009
WASHINGTON: The global economy will slow close to a halt this year as more than $2 trillion of bad assets in the United States help sink economies from Russia to Britain, the International Monetary Fund said Wednesday.
Bank losses worldwide from toxic U.S. assets may reach $2.2 trillion, the IMF said in a report, more than the $1.4 trillion that the fund predicted in October. World growth will be 0.5 percent this year, the weakest postwar pace, the fund said in a separate report.
The reports signal that write-downs and losses at banks totaling $1.1 trillion so far are only half of what's to come and that already contracting economies may worsen. Advanced and developing countries need to be "even more supportive" of demand than they already have been, with lower interest rates and fiscal stimulus, the lender said.
"Unless stronger financial strains and uncertainties are forcefully addressed, the pernicious feedback loop between real activity and financial markets will intensify, leading to even more toxic effects on global growth," the IMF said.
The IMF's latest forecast revises its estimate of world growth down from 2.2 percent in November.
Finance chiefs diverge on how to strengthen the rulesEuropean stocks climb on upbeat earningsSantander offers compensation to some Madoff-linked clientsU.S. gross domestic product will contract 1.6 percent, Japan's will shrink 2.6 percent and the euro area will decline 2 percent in 2009, the IMF said. The fund in November foresaw a 0.7 percent U.S. contraction, with declines of 0.2 percent in Japan and 0.5 percent in the euro zone.
Leading the Group of 7 nations in contraction this year will be the British economy, which the IMF predicted would slide 2.8 percent, compared with fund's forecast in November for a 1.3 percent drop.
"This is an extremely severe downward revision," said Simon Johnson, the IMF's chief economist until August 2008 and now a senior fellow at Washington's Peterson Institute, before the report.
In the United States, President Barack Obama is negotiating with Congress plans for $825 billion in tax cuts and spending projects to pull the world's largest economy out of a 13-month recession.
The Federal Reserve meets Wednesday in Washington to decide how to use emergency credit programs, rather than interest rates, to arrest the financial crisis.
The European Central Bank has cut its benchmark interest rate by more than half since early October to 2 percent, matching a record low. Governments are also beginning to ease fiscal policy as the 16-nation euro-region suffers its worst recession since the single currency began trading a decade ago
The fund urged "timely" passage of fiscal aid, saying "any delays will likely worsen growth prospects."
The Obama administration and federal regulators are considering setting up a "bad bank" that would absorb illiquid assets from otherwise healthy financial firms.
The IMF said "the restructuring process might involve the use of a publicly owned bad bank' to remove distressed assets from the balance sheets of institutions." Governments should "move expeditiously toward recapitalization" and disposal of bad debt, the IMF said.
The fund said that banks needed at least $500 billion of new cash "just to prevent their capital position from deteriorating further."
Hedge funds may have halved in size in the last three months of 2008, the fund said, dragged down by a combination of asset-price declines and investors withdrawing their money. Such a decline was "a particular concern for those markets in which hedge funds provided a significant proportion of market trading liquidity," the IMF said.
"Downside risks continue to dominate, as the scale and scope of the current financial crisis have taken the global economy into uncharted waters," the report said. "A sustained economic recovery will not be possible until the financial sector's functionality is restored and credit markets are unclogged."
China's economy will likely expand 6.7 percent this year, the IMF, reducing its estimate for the world's fastest-growing major economy from 8.5 percent in November. Russia will contact 0.7 percent this year, compared with a 3.5 percent expansion the IMF predicted in November, today's report showed.
The IMF report said inflation in advanced economies may fall to a record low of 0.3 percent this year, from a prediction in November of 3.6 percent. The average price of oil may be $50 a barrel this year, the IMF said, less than the $68 a barrel forecast it made three months ago.
http://www.iht.com/articles/2009/01/28/business/28...
Edited by Mon Ami Mate on Thursday 29th January 06:43
IMF said:
The fund urged "timely" passage of fiscal aid, saying "any delays will likely worsen growth prospects."
What f
king fiscal aid? The 2.5% cut in VAT?!Time to take a f
king great axe to the public sector and start winding income and corporation taxes rates down to sensible levels. Oh, and cut business proerty rates whilst there are still one or two shops still open and the odd engineering firm working 5 day weeks.I'm not surprised we are bottom of the heap we have spent the last few months convincing ourselves and the rest of the world we are absolutely in the st and low and behold they now believe us.
We need to stop bangin on how bad it is and try and get some confidence back in our economy.
t and low and behold they now believe us.We need to stop bangin on how bad it is and try and get some confidence back in our economy.
sone said:
I'm not surprised we are bottom of the heap we have spent the last few months convincing ourselves and the rest of the world we are absolutely in the st and low and behold they now believe us.
We need to stop bangin on how bad it is and try and get some confidence back in our economy.
Nah what fun would that be for this pro-tory board?t and low and behold they now believe us.We need to stop bangin on how bad it is and try and get some confidence back in our economy.
Instead lets bang on about every bit of bad news (not talking about the article above) we can find/make-up and claim the global failure is the fault of the labour government.
I'm neither pro tory or labour, I personally think they are as bad as each other but any political thread on here turns into a labour bashing exercise.
Let the bashing continue.
Edited by Ordinary_Chap on Wednesday 28th January 22:40
Ordinary_Chap said:
I'm neither pro tory or labour, I personally think they are as bad as each other but any political thread on here turns into a labour bashing exercise.
There is a difference. To the Conservatives, a healthy economy is pretty much an end in itself, to which nearly everything else is peripheral. To Labour, a healthy economy is only useful as a means to an end. What that end is depends on your POV - either social justice or pissing it up against the wall in an effort to buy votes and stay in power, take your pick.Yertis said:
Ordinary_Chap said:
I'm neither pro tory or labour, I personally think they are as bad as each other but any political thread on here turns into a labour bashing exercise.
There is a difference. To the Conservatives, a healthy economy is pretty much an end in itself, to which nearly everything else is peripheral. To Labour, a healthy economy is only useful as a means to an end. What that end is depends on your POV - either social justice or pissing it up against the wall in an effort to buy votes and stay in power, take your pick.Just watching Evan Davies about the sub prime market on the BBC, a bloke in the army (American) single parent earning 40k a year given a mortgage of 640k (dollars). Now that's where the problem started!.
Adrian W said:
Oh look what a suprise all of the economies that are going to grow still have a manufacturing base, they actually make and sell things you can actually touch.
The best fiscal stimulus that our government could offer would be assistance to businesses at the grass roots, to create jobs, wealth and opportunity. Instead of this Labour throw billions at the public sector and the idle/economically inactive. That's the root of the problem.[quote=s,one]Just watching Evan Davies about the sub prime market on the BBC, a bloke in the army (American) single parent earning 40k a year given a mortgage of 640k (dollars). Now that's where the problem started!.
[/quote]
Do you mean that's where the bubble burst first?
[/quote]
Do you mean that's where the bubble burst first?
Edited by NoelWatson on Thursday 29th January 09:48
On a lighter note, has anyone read the lead story on http://www.thedailymash.co.uk/ ? Swear filter prevents posting of direct link.
Made me smile, but then I am easily amused.
Made me smile, but then I am easily amused.
Mon Ami Mate said:
Is it just me or has the BBC completely failed to report this story? Wonder why...?
Channel 4 were a bit reluctant when covering it. The reporter said something like " it looks like the claim we were best placed to survive this recession was inaccurate" looking rather uncomfortable.
Mon Ami Mate said:
Is it just me or has the BBC completely failed to report this story? Wonder why...?
Me too comrade, it would after all be rather off message compared to what their political masters are telling us.And how many more times can Gordy just respond with "the conservatives are the do nothing party" - I want to stab him in the face with Anne Widdicome!!
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