IMF Again Cuts Global Growth Forecast As It Warns Of "Secular Stagnation"

Tyler Durden's picture

Moments ago the IMF did what it does better than anyone (with the exception of the Fed): it once again admitted its forecast of world growth had been too optimistic, and as a result in its just released quarterly World Economic Outlook report, it cut its forecast for 2016 global GDP growth from 3.4% to 3.2%, and from 3.6% to 3.5% for 2017. Indicatively, back in July 2014 the IMF was forecasting 4.0% GDP growth in 2016. It is now 20% lower.

 

While growth forecasts for the U.S. and euro area were marked down by 0.2 percentage point, the deepest reductions in advanced economies came in Japan.

A chart of its historical revision is shown below.

In the report, the IMF warns that a prolonged period of slow growth has left the global economy more exposed to negative shocks and raised the risk that the world will slide into stagnation, saying that "the danger of secular stagnation and an entrenchment of excessively low inflation in advanced economies, as well as of lower-than-anticipated potential growth worldwide, has become more tangible."

So how does one avoid this crunch? More QE, ZIRP, NIPR and so on, of course:

Monetary policy should remain accommodative where output gaps are negative and inflation is too low. In addition, given the uncertain effects of product and labor market reforms on prices, and amid persistent low inflation in many countries, strong and credible monetary policy frameworks are essential. Specifically, such frameworks—including quantitative easing or negative deposit rates, where  relevant—can keep medium-term inflation expectations anchored and ease the zero-lower-bound constraint on policy interest rates, thus preempting risks that structural reforms will create deflation, increase the real interest rate, and weigh on aggregate demand in the short term.

And then there is of course the helicopter.

According to Bloomberg, "the weaker outlook is likely to weigh on finance ministers and central bankers from around the globe, who gather in Washington this week for spring meetings of the IMF and World Bank, as well as a Group of 20 session." The IMF's recommendation to maintain monetary stimulus will, however, make it easier to do just that with Lagarde's blessing. After all whatever hasn't worked so far, will surely work eventually. Just do more of it.

Here are some of the associated remarks:

“Growth has been too slow for too long,” IMF chief economist Maurice Obstfeld said in remarks prepared for a press briefing. "There is no longer much room for error."

“But by clearly recognizing the risks they jointly face and acting together to prepare for them, national policy makers can bolster confidence, support growth, and guard more effectively against the risk of a derailed recovery,” he said.

The IMF cited among the biggest risks as a “return of financial turmoil itself, impairing confidence and demand in a self-confirming negative feedback loop.”

The fund cited several political and geopolitical pressures, including the rise of populism in the U.S. and Europe; the U.K.’s June referendum on whether to stay in the European Union; and large-scale refugee inflows that add to strains in Europe.

Oddly, there was no mention of failed central planning as the only real risk that matters, because unless somehow Yellen et al. have found a way to print trade, it will continue getting worse as the IMF's own forecast of global trade growth confirms: as of this moment, 2016 and 2017 trade is projected to grow by a paltry 3.1% and 3.8%, down 0.3% for both from just 4 months ago.

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greenskeeper carl's picture

All the stimulus these charlatans have given us in the last decade has resulted in 'secular stagnation' so their answer is moar stimulus?

I'm no economist, but it looks to me like all this stagnation is the result of too much debt....

LawsofPhysics's picture

yes, but any mention of debt forgiveness will destory all fiat overnight.  The bankers/financiers would be powerless and lose the fucking heads in a hurry.  Let's see if the "stimulus" goes to the individual TAXPAYERS this time around.

If I was forced to make the choice between execution and hyperinflation, I'd choose the latter then get the fuck out of dodge...

Everyone needs to pay attention now...  ...let's see who runs and where they run too...

place your bets...

unplugged's picture

yep - pull pin, throw, run your ass off the other way

Mr. Bones's picture

"This sounds like a job for ambassador pineapple."

FreeMoney's picture

Growth is the cure to gubermint debt, afterall we must grow our way out of it.  Naturally the more debt there is the more opportunities for banksters to make some money.  Nevermind that everyone else gets screwed.

PirateOfBaltimore's picture

But if we call the debt stimulus it isn't a drag.

Right?

RIGHT?!!!!!?!

 

 

insanelysane's picture

The Bloomberg TV cast says nothing to worry about unless you are a glass half empty pessimist.  The believe IMF is wrong and emerging markets will rebound.  I agree with them that the IMF is wrong.  Global GDP will be lucky to hit +1 with manipulated data.

Life of Illusion's picture

 

 

HEAR THAT,,,GLOBAL,,,means FED cant do it alone (less Obama domestic request) , IMF steps in and becomes global liquidity supplier

greenskeeper carl's picture

"They believe the IMF is wrong, and emerging markets will rebound"

That's a very revealing statement that's also disguised. What that is really saying is that the "strong dollar" is causing EM growth to grind to a halt because a lot of those countries borrowed heavily in dollars, which are now a lot more expensive against their currencies and therefore harder to pay back.

This is basically a call for the US to not raise rates from their paltry level, or, preferably, lower them (even to negative). It is also a call more most QE. Betting on an emerging market rebound is betting that the fed will not only NOT raise rates again, but will lower them and print moar. The ONLY way the EM markets 'rebound' is from a weaker dollar that allows those countries to service their debt again, but will really just lead to them borrowing more, since it will be 'cheap' again. Round and round we go....

LawsofPhysics's picture

Ah yes, the "perpetual growth" meme...

Eat the fucking bankers/financiers already, nothing changes otherwise.

101 years and counting's picture

100% of the global growth forecast is from China's #goal seek excel growth numbers.

E.F. Mutton's picture

“Growth has been too slow for too long,” IMF chief economist Maurice Obstfeld said in remarks prepared for a press briefing. "There is no longer much room for error."

Hey Captain Obvious, that ship sailed a loooong time ago

wildbad's picture

man..i almost believed their first out numbers this time...

Bill of Rights's picture

Print those coupons bitches!!!!!!!!!!!!!!!!

bada boom's picture

I like the way "Secular Stagnation" sounds. It's gotta be good.

XRAYD's picture

Lagarde and her staff should have their pay cut by 75% for doing the same dance and song every couple of months.  (Just make a recording).

They love stimulus with other peoples money, to enjoy their lives while pretending to work.

bada boom's picture

Lagarde?  How about another 75% cut in her skirt?

 

(awaiting downvotes)

khakuda's picture

Seriously, the best part is that Japan, which has done the most amount of monetary stimulus for the longest time period, is the one which had its growth reduced by the most.  So, their conclusion is that the world needs to do more of what Japan has been doing.

If it weren't so ulimately catastrophic, the level of idiocy would actually be amusing.  You would think the main requirement to be a central banker would be to have burned hands because they were the kids that never learned to stop touching the hot stove.  Ouch.  Ouch.  Ouch.  Ouch.  Ouch...

unplugged's picture

Fuck those IMF cunts (not literally please).  Everything they say is a lie in my book.

Lady Jessica's picture

This "secular stagnation" is a gimmick phrase originating from the odious L. Summers.

He should know full well that - absent the chains of ever expanding debt - global demand would be humming along nicely as the former developing world steps across the threshold of affluence.

But for some reason, our banker masters thought it wise to create a countervailing force of demand suppression, enslaving our young with debt instruments and strangling the productive sectors with ever expanding rent extraction schemes. 

ejmoosa's picture

The further into the future you go, they are always more optimistic.

For every year they want to forecast into the future they should be forced to also graph that many years into the past.  

But then we'd see that things were not good, are not good, and are not getting better.

 

And the current year would always appear to be the infamous bottom.

 

buzzsaw99's picture

there has been a huge growth of billionaires

Fogey's picture

Wait! I still see the Hamster wheel spinning?

Fogey's picture

Wait! I still see the Hamster wheel spinning?

NoWayJose's picture

It was as if 20% of global growth across the entire planet cried out in pain, and was suddenly silenced...

MPJones's picture

Various types of QE are obviously not going to solve the underlying problem of the US' and UK's structural negative trade balances and the resulting disequilibrium. Current monetary measures only serve to possibly postpone the inevitable correction, which will the more violent the longer it is postponed. Braindead approach.

Batman11's picture

After four decades of supply side economics

All the money is at the top with no investment opportunities.

All the debt is at the bottom and the repayments have destroyed the consumers purchasing power.

US firms can’t think of anything else to do accept engage in share buybacks.

Why invest when demand is so subdued?

There is lots of money about but it’s all in the wrong places.

What numpty said Capitalism trickles down?

Money trickles up, debt trickles down.

The market for subprime mortgages; subprime auto loans and payday loans is saturated I am afraid.

Oh dear, it looks like secular stagnation.

XAU XAG's picture

Good to see one of your comments BatmanII

cheech_wizard's picture

A few more hockey sticks and the IMF will have enough to field a team in an upcoming winter olympics.

 

Iam Yue2's picture

1. Contrarian Bullish.