The International Monetary Fund has revise upward its 2010 growth forecast for the world economy, since there are high-frequency indicators (industrial production, merchandise exports, manufacturing purchasing index etc.) pointing to a diminishing rate of decline in global output has moderated.
Economic growth during 2009-10 is now projected to be about ½ percentage points higher than forecast by the IMF in April, reaching 2.5 percent in 2010, according to the World Economic Outlook Update, [WEO] published on July 8. Among the major economies, growth rates have been marked up mainly for the United States and Japan.
“The good news is that the forces pulling the economy down are decreasing in intensity,” IMF Chief Economist Olivier Blanchard told a July 8 press briefing. “The bad news is that the forces pulling the economy up are still weak. The balance is slowly shifting, and this leads us to predict that, while the world economy is still in recession, the recovery is coming..” Blanchard said.
GDP in the advanced economies is projected to decline by 3.8 percent in 2009 before growing by 0.6 percent in 2010. Although the projections are 0.6 percentage points higher than in the April WEO forecast, growth in 2010 would still fall short of potential until late in the year, implying continuing increases in unemployment. Among the major economies, growth rates have been marked up mainly for the United States and Japan.
IMF’s forecast upgrade is certainly a positive sign, since it indicates an acceleration in the pace of the global economic recovery. However, let’s keep in mind that economic activity and recovery remains still sluggish by historic standards, and the world economy is still in recession. In addition, economic activity has yet to show convincing signs of a sustained improvement.