IMF Forecast Behind the Curve

10/16/2013 12:00 pm EST

Focus: MARKETS

Jim Jubak

Founder and Editor, JubakPicks.com

The latest outlook from the IMF on global growth does not reflect the current economic reality and MoneyShow's Jim Jubak thinks the inevitable revision might impact the markets.

The International Monetary Fund issues its World Economic Outlook twice a year, and they just came out with the newest one on October 8 and it basically says, "Well, after a really pretty not great year-really pretty not great year in 2013, when the global economy grew by about 2.9%, we're looking for an increase in growth rate globally to 3.6% in 2014." The problem with this, is that this is completely outdated by this point, that, if you remember, that this doesn't include any possible effects of the US government shutdown. It doesn't include the effects of US debt ceiling crisis.

All of those things aren't there, and this idea that the world global economy is going to grow at 3.6% in 2014, up from 2.9% in 2013, is based on a whole series of assumptions about what the developed economies of the world are going to do. The IMF, before all these crises, was saying, "Hey, we're seeing more momentum." The European economies are going to go from contraction to expansion in 2014.

The US economy actually looks like it's going to do better, so these numbers really were kind of dismal beforehand, 2.9%, 3.6% growth. China is slowing. India may be picking up, but emerging economies are not doing very well. They weren't that great going in. They were, but not great picture, but we were still positive, based on a view that the developed economies of the world were going to show better growth in 2014, than in 2013, and now, largely because of the crisis in Washington, you'd have to say that comes with a big, big question mark and I think the IMF, next time it goes through this, is going to wind up downgrading all these numbers, and I think that's a real worry as we look forward to 2014 and where the stock market is, especially in the United States right now.

This is Jim Jubak for the MoneyShow.com Video Network.

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