IMF Adjusts GDP Estimates, Boosts US 2010 GDP Expectations, Reduces 2011 Projections
From IMF's most recent world economic growth projection:
Then there is nothing like the let loose and forget graph. The emerging and developing economies are supposed to grow to 8% by 2012? Good luck with that Chinese money printer not terminally overheating by then.
As for threats - the IMF sees smooth sailing ahead. No inflation, no deflation, no worries. And exit policy will be perfectly managed by everyone, without a doubt.
Continued policy efforts are needed to sustain the recovery and prepare for exit
...Policymakers are faced with the daunting policy challenge of achieving the rebalancing of demand away from public and toward private sectors and away from economies with excessive external deficits toward those with excessive surpluses, while repairing financial sectors and fostering restructuring in real sectors. Both rebalancing acts are, however, not proceeding without problems. Many advanced economies continue to struggle with repairing and reforming their financial sectors. Concurrently, various emerging economies are grappling with the challenges posed by surging capital inflows, in some cases resisting exchange rate appreciation that could support stronger domestic demand and a reduction in excessive current account surpluses.
Regarding monetary policy, many central banks can afford to maintain low interest rates over the coming year, as underlying inflation is expected to remain low and unemployment high for some time. At the same time, credible strategies for unwinding monetary policy support need to be prepared and communicated now to anchor expectations and dampen potential fears of inflation or renewed financial instability. Countries that are already enjoying a relatively robust rebound of activity and credit will have to tighten monetary conditions earlier and faster than their counterparts elsewhere.
Due to the still-fragile nature of the recovery, fiscal policies need to remain supportive of economic activity in the near term. The fiscal stimulus planned for 2010 should be fully implemented. However, countries facing growing concerns about fiscal sustainability should make progress in devising and communicating credible exit strategies. In many cases, durable exit will require not only unwinding crisis-related fiscal stimulus but also substantial improvements in primary balances for a sustained period. Fiscal adjustment strategies should include: reducing fiscal deficits mindful of the need to protect spending on the poor and foreign aid and reforming entitlement spending, among others measures.
Once private demand has become self-sustained, the sequencing of exit from accommodative monetary and fiscal policy should be guided by a variety of considerations, including whether: high fiscal deficits and debt are raising concerns about sustainability and sovereign risk—which is the primary consideration in many countries; low interest rates might be contributing to asset price bubbles; the exchange rate is under pressure to appreciate or depreciate as well as its position relative to medium-term fundamentals; and how quickly monetary or fiscal policy can be adjusted to changes in domestic demand.
Basically nothing here that is not in the Keynesian playbook - everything will be great until it isn't, and the bubble blows up again. But then the IMF will point out repeatedly that they dedicated a whole sentence fragment to indicating that "low interest rates might be contributing to asset bubbles." Yes indeed.
Full IMF report: