IMF Downplays Trump Stimulus Effect; Slashes Saudi, Mexico Growth In Latest World Economic Outlook

Tyler Durden's picture

As the world's elite gather in Davos to decide for the minions what the world should look like, The IMF has taken a far dimmer view of global (and by that we mean Trumpian) economic growth than markets appear to be. In addition to slashing Brazilian, Mexican, and Saudi Arabian economic growth forecasts, Lagarde's lackeys are taking a cautious stance toward the policies of U.S. President-elect Donald Trump, who takes office this week, assuming only a modest boost to the U.S. economy from his promise of fiscal stimulus.

As Bloomberg reports, The IMF maintained its forecast for global growth in 2017 of 3.4 percent, the Washington-based organization said Monday in a quarterly update to its World Economic Outlook. Expansion for 2018 is forecast at 3.6 percent, also unchanged from the fund’s previous forecast in October.

After a lackluster outturn in 2016, economic activity is projected to pick up pace in 2017 and 2018, especially in emerging market and developing economies. However, there is a wide dispersion of possible outcomes around the projections, given uncertainty surrounding the policy stance of the incoming U.S. administration and its global ramifications. The assumptions underpinning the forecast should be more specific by the time of the April 2017 World Economic Outlook, as more clarity emerges on U.S. policies and their implications for the global economy.

 

With these caveats, aggregate growth estimates and projections for 2016–18 remain unchanged relative to the October 2016 World Economic Outlook. The outlook for advanced economies has improved for 2017–18, reflecting somewhat stronger activity in the second half of 2016 as well as a projected fiscal stimulus in the United States. Growth prospects have marginally worsened for emerging market and developing economies, where financial conditions have generally tightened. Near-term growth prospects were revised up for China, due to expected policy stimulus, but were revised down for a number of other large economies—most notably India, Brazil, and Mexico.

 

While the balance of risks is viewed as being to the downside, there are also upside risks to near-term growth. Specifically, global activity could accelerate more strongly if policy stimulus turns out to be larger than currently projected in the United States or China. Notable negative risks to activity include a possible shift toward inward-looking policy platforms and protectionism, a sharper than expected tightening in global financial conditions that could interact with balance sheet weaknesses in parts of the euro area and in some emerging market economies, increased geopolitical tensions, and a more severe slowdown in China.

In a welcome move to Brexiters the IMF hiked its outlook on UK growth, saying "domestic demand held up better than expected in the aftermath of the Brexit vote", but warned that while it was upgrading its outlook on China GDP, it warned that China's "sugar-rush" growth presents risks to future stability.

The growth forecast for 2017 was revised up for China (to 6.5 percent, 0.3 percentage point above the October forecast) on expectations of continued policy support. However, continued reliance on policy stimulus measures, with rapid expansion of credit and slow progress in addressing corporate debt, especially in hardening the budget constraints of state-owned enterprises, raises the risk of a sharper slowdown or a disruptive adjustment. These risks can be exacerbated by capital outflow pressures, especially in a more unsettled external environment.

The full breakdown:

The IMF further notes that the impact of a Trump administration is one of the biggest unknowns facing the global economy.

While Trump has promised to cut taxes and boost infrastructure spending, he’s also threatened to impose tariffs on trade partners such as China and Mexico. Such punitive measures may sap growth if they provoke retaliation. Trump’s policy priorities will become clearer after his inauguration on Jan. 20 in Washington.

 

The high degree of uncertainty about what’s in store for U.S. economic policy presents a “wider than usual range of upside and down risk factors,” IMF Chief Economist Maurice Obstfeld said in remarks prepared for delivery Monday.

 

“In light of the U.S. economy’s momentum coming into 2017 and the likely shift in policy mix, we have moderately raised our two-year projections for U.S. growth,” he said. “However, the specifics of future fiscal legislation remain unclear, as do the degree of net increase in government spending and the resulting impacts on aggregate demand, potential output, the Federal deficit, and the dollar.”

 

The IMF bumped up its forecast for U.S. growth by only 0.1 percentage point this year and 0.4 points for 2018. The U.S. economy will expand by 2.3 percent in 2017 before firming to a 2.5 percent rate in 2018, according to the update.

 

The Federal Reserve is now expected to raise rates at a less gradual pace than IMF staff projected in October, the fund said, without specifying the number of rate hikes it anticipates this year.

It remains less optimistic on EM nations such as Brazil, Saudi Arabia, and Mexico, however:

  • *IMF CUTS BRAZIL 2017 GROWTH OUTLOOK TO 0.2% FROM 0.5%

The International Monetary Fund more than halved its 2017 growth outlook for Brazil, citing weaker-than-expected activity in Latin America’s largest economy.

 

Brazil will grow 0.2 percent this year, compared with a prior forecast of 0.5 percent, the IMF said in an update of its World Economic Outlook. The fund is now more pessimistic than all but three of the 39 analysts Bloomberg surveyed, whose median forecast is 0.8 percent.

 

Like most economists, the IMF is tempering its optimism about the government of President Michel Temer. The fund had forecast stagnation for Brazil early last year, but boosted that outlook to a half-point expansion soon after Temer assumed Brazil’s presidency in May.

  • *IMF CUTS SAUDI ARABIA 2017 GDP GROWTH FORECAST TO 0.4% FROM 2%

The International Monetary Fund cut its growth outlook for Saudi Arabia on lower oil production, underscoring the challenges facing the kingdom as it seeks to overhaul its economy.

 

Gross domestic product will expand 0.4 percent in 2017, the lender said in its World Economic Outlook report update on Monday, citing the impact of the recent deal by the Organization of the Petroleum Exporting Countries to reduce output. It compares with the fund’s October prediction of 2 percent, and a median estimate of 0.9 percent in a Bloomberg survey.

 

The sharply lower forecast comes as Saudi Arabia seeks to build investor confidence in its long-term strategy to reduce dependence on crude and boost non-oil sectors of its economy, while trying to plug one of the Middle East’s biggest budget deficits. The kingdom is planning to borrow as much as $15 billion this year on international debt markets to help fund its spending plans, following last year’s $17.5 billion sovereign bond sale.

  • *IMF CUTS MEXICO 2017 GROWTH OUTLOOK TO 1.7% FROM 2.3%

Citing “U.S.-related uncertainty,” the IMF slashed its projection for Mexico’s growth to 1.7 percent this year, down 0.6 percentage point from the October forecast.

 

Trump has promised to end or renegotiate the North American Free Trade Agreement between the U.S., Canada and Mexico that’s been key to Mexico becoming a manufacturing powerhouse over the past two decades.

Ironically, given the establishment's devastating forecast pre-Brexit, The IMF has increased its growth outlook for UK... (via The FT)

The International Monetary Fund has upgraded its UK growth forecast for the second time after the Brexit vote as it predicted global economic growth will pick up from its slowest pace since the aftermath of the financial crisis.

 

In its latest set of economic forecasts, the Washington-based IMF said it now expects the British economy to expand by 1.5 per cent this year from an earlier projection of 1.1 per cent – the biggest single upgrade of any major economy in its January update for 2017.

 

Growth in 2016 was also nudged up to 2 per cent from an October projection of 1.8 per cent but expansion in 2018 would come in lower at 1.4 per cent from an earlier forecast of 1.8 per cent, said the fund.

 

It is the latest immediate growth upgrade for the UK since the IMF warned a decision to leave the EU would wreak “severe” damage to Britain’s growth prospects before the June referendum.

 

The pre-referendum warnings came in for severe criticism from pro-Brexit campaigners, with the fund defending itself by saying it would have been “malpractice” not to have considered worst-case scenarios from a “leave” vote.

 

The UK economy has broadly defied warnings to continue growing at a healthy clip since the June vote, accelerating to a 0.6 per cent pace in the third quarter. The latest raft of business surveys also point to robust growth at the end of the year, helped along by buoyant consumer spending.

 

“Domestic demand [has] held up better than expected in the aftermath of the Brexit vote”, said the IMF.

*  *  *

Full IMF Report below:

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silverer's picture

The IMF is correct. Trump didn't cause the market surge. College educated American investors and their expert broker/fund managers did that. When you hear "college educated" or "expert", tighten your laces and run like hell to the nearest PM seller.

FreezeThese's picture

Healthcare for all - is this the same DonJons? Not exactly c o n s e r v a t i v e

BullyBearish's picture

I M F   =   IMMORAL   MO   FOs

nmewn's picture

Leatherface LaGarde and Hillary Crony...both guilty as hell...but...no intent, so therefore, un-guilty.

What a Shit Show.

RiverRoad's picture

Lagarde, Yellen, Merkel, Clinton..........see a pattern there?  A bunch of frump puppets fronting for the Soros/Deep State NWO.  Down to using blacks/Obama and women to fool and mollify the world's sheeple.

Not working.

Life of Illusion's picture

 

 

TRUMPS NEW DEPT

https://en.wikipedia.org/wiki/White_House_National_Trade_Council

The National Trade Council (NTC) of the United States will be the principal forum used by the President of the United States to advise on innovative strategies in trade negotiations, coordinate with other agencies to assess U.S. manufacturing capabilities and the defense industrial base, and help match unemployed American workers with new opportunities in the skilled manufacturing sector. The council will form part of the Office of White House Policy which contains the National Economic Council and other offices. The office, announced on December 21, 2016 with Peter Navarro being announced as the office's Director, will be created by Donald Trump when Trump becomes President.[1]

CheapBastard's picture

The American has been in a recession since 2008 and Obama's Obamacare disaster was the straw that broke the camel's back, so to speak.

I am glad the rest of the world [and east and west coasts] are catching up to middle America pain.

Putting Americans first means helping the middl class in flyover country ... for a change.

BabaLooey's picture

Exactly.

These two twats should be lashed to a mast of an abandoned schooner and pushed off a dock into the Artic Ocean.

Cabbage farts and tanning oil included.

Bunga Bunga's picture

Boss is a convicted criminal, fact.

Silver Bug's picture

The financial elites are in full blown panic mode over the actions Trump is taking. The markets as we know it are greatly going to be upset, while precious metals continue to move higher. Perhaps its time for real change and perhaps, thats a good thing.

 

Gerald Celente - Soros Wrong! Trends Journal Right!

 

 

illuminatus's picture

Hope springs eternal. Remember all the other times you had those high hopes? I'm all done with that, but good luck to you.

illuminatus's picture

How quaint, you still believe the whole market forces story? Good one!

Captain Chlamydia's picture

Lagarde: prepare for the worst economic crisis ever. Stash water, food, medication and ammo. 

As if.... 

BabaLooey's picture

Did someone take away Lagarde's tanning bed?

That fucking brown prune needs to be taken to the I.S.S. and strapped onto one of it's antennae. 

MFL5591's picture

The IMF has never gotten anything right, why now?

pauhana's picture

Agreed!  Why does anyone listen to a thing they say?  They haven't been right about global growth EVER! 

cheech_wizard's picture

I know, right? When was the last time the IMF actually downgraded or actually came out and stated there would be lower growth?

Standard Disclaimer: Every graph I've seen come out of the IMF reminds me of Mann's hockey stick graph in regards to global temperatures... They are going to rise exponentially any...minute...now...

Scuba Steve's picture

Its not IMF opinion anyway ... its subterfuge from them ALWAYS!!

Skiprrrdog's picture

Who is that picture of the woman with the gray hair? She looks like Gandalfs Mom...

Citizen_x's picture

 

She does look like a man.  Bizarre...

Silverhog's picture

More diarrhea from convict Lagarde.

The Last Mofo Standing's picture

Is Lagarde in that photo giving everyone the "sly polite finger"? Her skin treatments appear to be almost finished, she is nearing perfect mummification.

The Last Mofo Standing

Allen_H's picture

Just watched a video today on this tranny, in some of those photos it is impossible not to see the man below the disguise.

It is a sick beast for sure.

LawsofPhysics's picture

LOL! When have these fuckers ever made a correct forcast?  Propaganda, nothing more.

Same as it ever was.

GreatUncle's picture

"Same as it ever was"

IMF getting it wrong yet again :-)

If they said nothing at all they call say they were right 100% of the time and only by opening their mouths do they get it wrong.

edifice's picture

This is pushing the Peso down, again.

vegas's picture

The shitbags that run the IMF and tout themselves as "experts", are the same ones who buy $40 hot dogs in Davos. Fucking retards who haven't a clue.

 

www.traderzoogold.blogspot.com

G-R-U-N-T's picture

What Lagarde has to worry about is no longer having a buddy (Obama) in the Whitehouse! Here you have a convicted criminal who is still head of the IMF. It will be interesting to see how Trump plays his cards.

small axe's picture

Lagarde and her IMF scum should think about moving behind the castle walls soon, the natives are getting restless (don't forget to stock up on the $40 hotdogs).

Batman11's picture

Davos essential reading – the Corn Laws and Laissez-Faire

It’s all about the cost of living.

The minimum wage is set by the cost of living and needs to be the same in West and East.

The US has probably been the most successful in making its labour force internationally uncompetitive with soaring costs of housing, healthcare and student loan repayments.

These all have to be covered by wages and US businesses are now squealing about the high minimum wage.

US (and all Western) labour has been priced out of global labour markets by the high cost of living.

Hence, Trump and protectionism.

 

Milton Freidman was a complete dipstick about free trade, unfortunately Western leaders followed him blindly without thinking.

Milton all those costs you wanted pushed on workers actually have to be covered by wages and business pays for them.

It takes costs off the rich and pushes them onto business and industry.

They now go abroad for cheaper labour.

You dipstick.

Scuba Steve's picture

Milton Friedman was ABSOLUTELY correct in his Free Trade synopsis.

He always gave caveats in his essays such as each countries Tariffs, regulation,  currency manipulation to achieve likewise tariffs, govt induced monopolies, a growing govt employees state, etc.

The man was spot on everything else being equal.

In Trump, its possible you may get someone who maybe put things closer to equal in regards to entrepreneurialism vs. big monopolies, and country to country eunequalizing tariffs/currency manipulation.

All jmo.

illuminatus's picture

Finger right back at you Christine, for whatever that's worth.

Batman11's picture

Leaders with two brain cells to rub together could get the economy back on track in no time.

It is hard to get a return on capital today; you have to pay people to take it off your hands with negative yields.

This is what excessive inequality looks like.

The world is full of pent up demand, a majority of consumers would like to have the money to be able to consume more.

There is a shortage of demand in the system due to those at the bottom not having enough money.

Where is all the money?

2014 – “85 richest people as wealthy as poorest half of the world”

2016 – “Richest 62 people as wealthy as half of world’s population”

2017 – Richest 8 people as wealthy as half of world’s population

Inequality is horrendous and getting worse.

What can we do?

Redistributive taxation just like we used to have when we had the lowest levels of inequality in recorded history (1950s - 1970s).

It’s not rocket science is it?

If we could find leaders with two brain cells to rub together the economy would be back on track in no time.

Oh dear, there aren’t any.

cheech_wizard's picture

Did you ever stop to think that is precisely our system of taxation that led to the rise in inequality.

For fuck's sake, you mental midget, how did this country ever survive before Americans paid any taxes at all?

 

georgekaplan's picture

I read all of these global economic projectons and percentages of growth, and I think, "this is a joke, right?"  If local economies can't add 2+2 and get their budgets squared away, do they think I'm going to actually believe people out there are capable of projecting global economy??  I guess it keeps them off the streets, though.

falak pema's picture

That Hermes bag of Lady Lagarde has in it the innards of toads and medieval witches' brew that tell us who is Macbeth today.

Give you one guess !

"I predict thou shall be crowned Potus when thou shall have  killed that King of "yes we can scam" !"

"Beware of Macduff" said the witch. 

"He has a lean and hungry look".... (mixing my Shakespearean metaphors to make my point).

haha! now look for the man who says : 

 

There is a tide in the affairs of men.
Which, taken at the flood, leads on to fortune.

Omitted, all the voyage of their life Is bound in shallows and in miseries.

On such a full sea are we now afloat
And we must take the current when it serves,

Or lose our ventures.

Julius Caesar Act 4 by William Shakespeare. 

GreatUncle's picture

IMF been need to be disbanded.

Have they got anything right in the last decade? Nope!

Run by the masters of the universe for their own entitlement.

Justin Case's picture

How things work @ the IMF.

Confessions of an Economic Hit Man is a partly autobiographical book written by John Perkins published in 2004

hedgiex's picture

Play the long shorts. Nothing will come out of this echo chamber.