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IMF Cuts Global Forecast, Sees European Recession, Warns Of 4% Economic Crunch If No Euroarea Action

Tyler Durden's picture




 

The latest IMF Global Financial Stability Report is out and it is not pretty. The IMF now sees:

  • 2012 world growth outlook cut to 3.3% from 4.0%, 2013 growth revised lower to 3.9% from 4.5%
  • 2012 US growth of 1.8%, 2013 at 2.2%
  • 2012 UK growth of 0.6%, down from 1.6%
  • 2012 China growth of 8.2%, down from 9.0%
  • Eurozone to enter "mild" recession, whatever that is, with -0.5% economic growth, to grow again in 2013 by 0.8%. Unclear just how with all the deleveraging...

IMF also adds that without action, the debt crisis may force a 4% Euro-area contraction, in line with what the World Bank, controlled by a former Goldmanite, said. Lastly, the IMF says that Europe needs a larger firewall and bank deleveraging limits. Well there is always that €X trillion February 29 LTRO.

Some selections:

The recovery is expected to stall in many economies

 

The updated WEO projections see global activity decelerating but not collapsing. Most advanced economies avoid falling back into a recession, while activity in emerging and developing economies slows from a high pace. However, this is predicated on the assumption that in the euro area,  policymakers intensify efforts to address the crisis. As a result, sovereign bond premiums stabilize near current levels and start to normalize in early 2013. Also, policies succeed in limiting deleveraging by euro area banks. Credit and investment in the euro area contract only modestly, with limited financial and trade spillovers to other regions.

 

Downside risks have risen sharply

 

Downside risks stem from several sources. The most immediate risk is intensification of the adverse feedback loops between sovereign and bank funding pressures in the euro area, resulting in much larger and more protracted bank deleveraging and sizable contractions in credit and output.  Figure 4 presents such a downside scenario. It assumes that sovereign spreads temporarily rise. Increased concerns about fiscal sustainability force a more front-loaded fiscal consolidation, which depresses near-term demand and growth. Bank asset quality deteriorates by more than in the baseline, owing to higher losses on sovereign debt holdings and on loans to the private sector. Private investment contracts by additional 1¾ percentage points of GDP (relative to WEO projections). As a result, euro area output is reduced by about 4 percent relative to the WEO forecast. Assuming that financial contagion to the rest of the world is more intense than in the baseline (but weaker than following the collapse of Lehman  Brothers in 2008) and taking into consideration spillovers via international trade, global output will be lower than the WEO projections by about 2 percent.

 

Another downside risk arises from insufficient progress in developing medium-term fiscal consolidation plans in the United States and Japan. In the short term, this risk might be mitigated as the turbulence in the euro area makes government debt of these economies more attractive to  investors. However, as long as public debt levels are projected to rise over the medium term, and in the absence of well-defined and credible fiscal consolidation strategies, there is the possibility of turmoil in global bond and currency markets. A more immediate risk is that an accident-prone political economy will lead to excessive fiscal tightening in the near term in the United States. In key emerging economies, risks relate to the possibility of a hard landing, especially in the context of uncertain (possibly slowing) potential output. In recent years, a number of major emerging economies experienced buoyant credit and asset price growth as well as rising financial vulnerabilities. This has buoyed demand and may have led to overestimation of the trend growth rates in these economies. Should the dynamics of real estate and credit markets unwind triggered by losses in confidence and a paring back of expectations at home or by falling demand from abroad—the impact on economic activity could be very damaging.

 

Moreover, concerns about geopolitical oil supply risks are increasing again. The oil market impact of  intensified concerns about an Iran-related oil supply shock (or an actual disruption) would be large, given limited inventory and spare capacity buffers, as well as the still-tight physical market conditions expected throughout 2012.

Full report below:

 

 

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Tue, 01/24/2012 - 11:15 | 2092366 lolmao500
lolmao500's picture

Gee, IMF stops lying? Or have they stopped taking LSD?

And these growth outlook are total garbage. Just wait till Iran is bombed and oil skyrockets to 300$ a barrel.

Tue, 01/24/2012 - 11:15 | 2092375 slaughterer
slaughterer's picture

IMF has not stopped lying and taking LSD, they just want more money. 

Tue, 01/24/2012 - 11:18 | 2092388 Spooky Polish
Spooky Polish's picture

:) someone tooked them their prozac pills ... 

Tue, 01/24/2012 - 11:42 | 2092480 The Big Ching-aso
The Big Ching-aso's picture

 

 

Hallucinogenic obfuscation.   Everybody's doing it.   It's like party Twister on acid.   It'd be a major drag to be the only sober one on the mat.

Tue, 01/24/2012 - 11:43 | 2092494 DaveyJones
DaveyJones's picture

but it's not a depression / recession, it's a perpetually "stalled recovery."

Tue, 01/24/2012 - 12:04 | 2092577 WonderDawg
WonderDawg's picture

I think their worst case scenario is still ridiculously optimistic.

Tue, 01/24/2012 - 11:23 | 2092393 francis_sawyer
francis_sawyer's picture

What's world GDP? something like 70 trillion?...

So my paper napkin here says that to AVOID a .07% drop in growth (4.0 to 3.3), you're looking at 490 billion... So yeah... a $10T LTRO operation makes a lot of sense doesn't it? /sarc off

...& one anecdotal note to go along with that... I've found that the problem with 'paper napkin' analysis, these days, is that the paper napkins appear to be getting too small to handle the job...

Tue, 01/24/2012 - 11:37 | 2092465 disabledvet
disabledvet's picture

looks like someone is in Jeapordy! let's look closer:
http://www.youtube.com/watch?feature=player_detailpage&v=qhfltcveZ0I

Tue, 01/24/2012 - 12:04 | 2092557 francis_sawyer
francis_sawyer's picture

even CLOSER...

"I lost on JEOPARDY" ~ Weird Al

http://www.youtube.com/watch?v=BvUZijEuNDQ&feature=related

Tue, 01/24/2012 - 11:22 | 2092411 DB Cooper
DB Cooper's picture

I'll still take the under on all those numbers.   Wait - the gov'ts put out the numbers don't they.  I'll just buy more gold.

Tue, 01/24/2012 - 11:47 | 2092518 jekyll island
jekyll island's picture

This is where I stopped reading: "Decisive and consistent policy action is urgently needed."  Cannot believe it took me six pages to come to that realization.  

Tue, 01/24/2012 - 12:20 | 2092671 michael_engineer
michael_engineer's picture

The IMF is known for their rosy projections, which I believe some of you are referring to as their "lying".

So what if their reduced expectations are just their "new rosy" in their attempts to adjust to the "new normal".

If they have consistently overstated expectations in the past as that suits their purpose, then it just might be that they are still overstating expectations to suit their purpose.

They may have scaled back their "rosy outlook" so they are not viewed as too wildly out of touch with the real economic crisis on the ground.  Being too far out of touch would cause them to loose credibility quickly.

 

Tue, 01/24/2012 - 11:15 | 2092368 LawsofPhysics
LawsofPhysics's picture

Bullish.  Oh yeah, bitches!  Fuck these financial terrorists.  "Do as we say or else!"  Or else what?  You will leave the productive people alone and actually prosecute the fucking fraud or just simple dry up and die?  Sounds good to me.

Tue, 01/24/2012 - 11:17 | 2092373 GOSPLAN HERO
GOSPLAN HERO's picture

But, huge U.S. debt is ultra bullish.

Tue, 01/24/2012 - 11:15 | 2092374 Spooky Polish
Spooky Polish's picture

Bullish ! 

Bullshitish ! 

 

choose Yourself 

Tue, 01/24/2012 - 11:19 | 2092396 lolmao500
Tue, 01/24/2012 - 11:35 | 2092458 mtomato2
mtomato2's picture

Wow. Yay, indeed!

 See also: "kittens and boobies" on  the You Tubes...

Tue, 01/24/2012 - 11:38 | 2092471 prains
prains's picture

44boobs
34 IQ

Tue, 01/24/2012 - 11:54 | 2092547 mtomato2
mtomato2's picture

Not that there is anything wrong with that

Tue, 01/24/2012 - 11:44 | 2092500 optimator
optimator's picture

As phoney and inflated as the market.

Tue, 01/24/2012 - 11:16 | 2092376 Captain Kink
Captain Kink's picture

IMF even later than the World Bank in making these adjustments, which will fall short of the reality--in real terms.  Deficit spending will have GDP up 2-3% in EZ as a whole.  Just like here... Madness.

Bullish... (sigh).

Tue, 01/24/2012 - 11:15 | 2092378 slaughterer
slaughterer's picture

Market is full-on BTD mode today.  Let another major bad news item drop and we should see new highs for the year. 

Tue, 01/24/2012 - 11:15 | 2092379 nudlee
nudlee's picture

by now we all already know the ultimate magical keywords: it's all PRICED IN! 

Tue, 01/24/2012 - 13:48 | 2093085 RiverRoad
RiverRoad's picture

War too apparently.

Tue, 01/24/2012 - 11:17 | 2092385 fonzannoon
fonzannoon's picture

I hope everyone who was long was able to withstand the awful 90 point drop in the dow this morning. It was an awful correction and we were lucky to survive. Should be smooth sailing from here.

Tue, 01/24/2012 - 11:32 | 2092444 slaughterer
slaughterer's picture

More of that "90 point drop" to come later in the day. 

Tue, 01/24/2012 - 11:18 | 2092386 lolmao500
lolmao500's picture
NYPD Reportedly Experimenting With Drones To Monitor NYC

http://www.wpix.com/wpix-nypd-drones-nyc-012412,0,6559085.story

Freedom, America style. Only a matter of time before they put missiles on those.

Tue, 01/24/2012 - 11:24 | 2092419 battle axe
battle axe's picture

NYPD is going to arm the drones and do what? Use them on New Yorkers? Come on.

Tue, 01/24/2012 - 11:39 | 2092475 mtomato2
mtomato2's picture

Yes. Yes, they will.   For your own sake, don't think they wont.

Tue, 01/24/2012 - 11:42 | 2092493 battle axe
battle axe's picture

And what Proof do you have that this would ever happen? I know guys who serve on the NYPD and that would never happen.

Tue, 01/24/2012 - 12:05 | 2092573 mtomato2
mtomato2's picture

I don't NEED proof, numbnuts.   I can draw a straight line between two points, e.g. where we've been and where we are, and easily extrapolate where we are going.   Also, it helps when the commander-in-fucking-chief tells us he wants to arm a set of domestic federal militants against their own countrymen. But never mind me. Keep sucking down the Bud Light and saying: "Hey, y'all! Watch this!"

 Sheeple FASCINATE me.

Tue, 01/24/2012 - 12:10 | 2092605 battle axe
battle axe's picture

"I don't need proof" the last cry of the idiot. Whenever one of you guys make some stupid statement you never have any proof, and your fall back position is to curse like a child and use idiotic words like "Sheeple". Talk about being fasinated, you guys have way to much time on your hands and no facts to base your arguments on. That is why no mater how loud you shout, no one will listen. Now go back to your basement apartment and let grown ups talk. 

Tue, 01/24/2012 - 12:22 | 2092679 mtomato2
mtomato2's picture

Take your entire two weeks on Zero Hedge and shove it cleeeeaaar up your fat ass.

 I'm through with you. Oh, and congrats on figuring out how to vote for yourself.

Tue, 01/24/2012 - 12:25 | 2092692 mtomato2
mtomato2's picture

And also: "spell check" DOES work on the comment box.

 

Dick.

Tue, 01/24/2012 - 12:41 | 2092790 battle axe
battle axe's picture

Really math teacher/welder, so my 20+ yrs on the Fixed Income side of the Business does not count as much as some guy who lives out in the woods, because he has been on Zerohedge longer? You just made my day, I love it. Please tell me how the world works? And you didnt answer my question about proof about thhe NYPD and their armed drones. What a Shocker! Pathetic. Now run away.

Tue, 01/24/2012 - 12:26 | 2092700 lolmao500
lolmao500's picture

So let's ignore the history of the NYPD, the most corrupt police force in the US... you really are a tard.

Tue, 01/24/2012 - 12:48 | 2092834 battle axe
battle axe's picture

They are not perfect, but they are also not the most corrupt police force in the US, that would be New Orleans Police force, according to the FBI. Here is something new for you to try, an actual fact. Do you know anyone on NYPD, I do and I live in NYC so I might be better informed then you and your Welder/Math Teacher/Anger Management Patient buddy. "Tard" really? Come on, do better then that. 

Tue, 01/24/2012 - 14:15 | 2093200 lolmao500
lolmao500's picture

Do you know anyone on NYPD, I do and I live in NYC

That's why you are such a joke. It explains it all.

Tue, 01/24/2012 - 14:22 | 2093229 battle axe
battle axe's picture

My god, what a comeback. As opposed to what ever inbred backward ass place you live. Go away and do some research for once. 

Tue, 01/24/2012 - 11:29 | 2092438 marcusfenix
marcusfenix's picture

well Bloomberg did call the NYPD his "own private army", and every good army needs drones...

Tue, 01/24/2012 - 11:39 | 2092483 cranky-old-geezer
cranky-old-geezer's picture

 

 

Every police force is a city's private army.

Private mercenary force actually.  Police are mercenaries by definition.

And they're completely illegal.  There is no provision in our constitutional form of government for police ...nor city governments for that matter.

City governments are military martial law jurisdictions during peacetime, completely illegal in America.

Tue, 01/24/2012 - 11:47 | 2092521 battle axe
battle axe's picture

I think there is a lot of case law in this country that would disagree with your conclusion, spanning about 120yrs+.

Tue, 01/24/2012 - 12:37 | 2092633 cranky-old-geezer
cranky-old-geezer's picture

 

 

Yes I agree, there's lots of case law saying otherwise.

It started after the civil war when America went through a massive change in government structure.

Bottom line, the federal government conquered all the states.  Constitutional state governments were abolished. 

The entire expanse of America is now federal territory, and the constitution does not apply in federal territory.

The former states are now geographical districts of the federal government.

State governments are now district governments under the authority of the federal government.

State constitutions are abolished, just like the federal constitution is abolished.

In their new role as district governments, they can establish sub-level district governments within their geographical area.   They're known as city "municipal" governments

... and they're military martial law jurisdictions

... just like the state-level district government is a military martial law jurisdiction

...just like the federal government itself is a military martial law jurisdiction.

Anywhere you have police is a military martial law jurisdiction, by legal definition.

I merely said it's unconstitutional. 

But the constitution has been abolished.

America is exactly like Russia in a legal sense, and has been since the civil war.

All the courts are fully aware of this, from federal all the way down to city.

The American people are clueless about it.

Tue, 01/24/2012 - 12:53 | 2092851 battle axe
battle axe's picture

Wait a minute, when was the Constitution of the United States abolished? I missed that one, and I was a history major in college, granted not one of the best students but I think I would of caught that fact.

Tue, 01/24/2012 - 13:41 | 2093013 cranky-old-geezer
cranky-old-geezer's picture

 

 

The Constitution OF the United States hasn't been abolished.

The original constitution, the Constitution FOR the United States of America, has been abolished.

The key word is OF.  The Constitution OF the United States is a constitution made by the federal government, therefore subject to the federal government.

The federal government is supreme OVER the constitution, not subject to the constitution, like it was under the original constitution.

Like I said, every court in the land is fully aware of this.

The American people are clueless about it ...like you apparently.  They (and you) still think we're under the original constitution. 

Tue, 01/24/2012 - 14:08 | 2093175 battle axe
battle axe's picture

That I do. As for "clueless" I guess it depends on who is right. You might want to calm down a little there skippy. 

Tue, 01/24/2012 - 11:57 | 2092556 prodigious_idea
prodigious_idea's picture

Let's hope that this type of monitoring gets the same SC challenge as putting GPS on suspects.

Tue, 01/24/2012 - 11:18 | 2092390 rsnoble
rsnoble's picture

Fuck the IMF. Can't the likes of Iran get all these motherfuckers in the same place at the same time?

Tue, 01/24/2012 - 11:18 | 2092391 GeneMarchbanks
GeneMarchbanks's picture

IMF has the cognitive bias called the Action Bias. Just FYI...

Tue, 01/24/2012 - 11:20 | 2092401 francis_sawyer
francis_sawyer's picture

& 'someone' wants Larry Summers to run that thing... Oh swell!

Tue, 01/24/2012 - 11:52 | 2092541 GeneMarchbanks
GeneMarchbanks's picture

No, that would be the World Bank which together with the WTO completes the Unholy trinity.

Tue, 01/24/2012 - 11:19 | 2092394 PaperBear
PaperBear's picture

"bank deleveraging limits" ?

What is one of those ?

Is it supposed to stop a bank from filing for bankruptcy ?

Tue, 01/24/2012 - 11:22 | 2092409 LongSoupLine
LongSoupLine's picture

 

 

IMF "action" translation = print money

Tue, 01/24/2012 - 11:22 | 2092412 battle axe
battle axe's picture

IMF is looking for as much money as they can get, so now it is time for the scare tactics so they can try to milk us for money to use for the abortion called the Euro Union.

Tue, 01/24/2012 - 11:25 | 2092420 pauldia
pauldia's picture

Someone get a copy of tonughts State of the Union? Against a partisan backdrop of nixing the XL Pipeline will Obama call for more domestic use of energy;Nat Gas? Take a look at Westport Innovations WPRT,just so happens George Soros is a major holder. Take a look at todays action in Clean energy Fuels  CLNE, T Boone  Pickens company. Curious,just a coincidink?

Tue, 01/24/2012 - 11:31 | 2092433 The Count
The Count's picture

Am I the only one who sees 'growth' not as a good thing but as a fix to a debt junky world? When India or China have a year with 7% growth the economists have an orgasm. But who realizes that 7% per year of anything means doubling in 10 years? Where are the resources going to come from. How is infrastructure supposed to keep up? Remember 'overpopulation' which was a big deal back in the 70s? Now you hear zippo about that. Why? Because the entire world's economy is build on the fallacy of growth, in order to pay back debt. And unofficially the US wanted all the illegals to come in because us gringos weren't making enough babies to create demand/growth. The root of all evils is our finance system dear friends. And those exact people have successfully infiltraded our government. There is no way your are going to get elected to any position of power without the bankers financing your campaign. And then they expect a whole lot in return. Do not even think for one moment that we all can vote ourselves out of this mess.

Tue, 01/24/2012 - 11:38 | 2092473 Sockeye
Sockeye's picture

You chose the red pill, welcome. (Once you're in the rabbit hole there's no turning back.)

Tue, 01/24/2012 - 11:51 | 2092529 Dr. Engali
Dr. Engali's picture

That is probaly the truest statement I've read.

Tue, 01/24/2012 - 11:57 | 2092553 The Count
The Count's picture

Now do I at leat get to lay Trinity?

Tue, 01/24/2012 - 11:49 | 2092524 Dr. Engali
Dr. Engali's picture

There is only one way out of this mess and people are going to have to get a lot hungrier for it to happen.

Tue, 01/24/2012 - 11:29 | 2092437 UGrev
UGrev's picture

We need to reinforce our monetary walls in America so we can watch the world burn around us instead of burn along with it. It's sad to say, and I hate to say it because I want not to watch the horrors of a collasped and desperate population as they try to claw their way back from disaster; however, at the same time,  I have no wish to join them. 

To the rest of the world.. We're sorry, we can't help you; you're on your own. 

Ron Paul 2012

Tue, 01/24/2012 - 11:32 | 2092442 The Axe
The Axe's picture

Tyler,,,do you really think you need to post what the IMF...said...????/

Tue, 01/24/2012 - 12:27 | 2092709 NotApplicable
NotApplicable's picture

Don't you like to know the script?

Tue, 01/24/2012 - 11:34 | 2092453 PORTA PORTA
PORTA PORTA's picture

IMF is direclty linked and related to Club of Paris ( Club de Paris )...

IMF finds the clients and CCP do the DD and debt relief / restructuring... EVEN WAR FUNDING !

Why all nations owe money to Club of Paris ?

2008 total : 330,1 bio $ !!!
http://www.scribd.com/doc/79216188/Amounts-Due-to-Paris-Club-Creditor-Countries-2008-PP
2009 total :342,4 bio $ !!!
http://www.scribd.com/doc/79216193/Amounts-Due-to-Paris-Club-Creditor-Countries-2009-PP
2010 total : 330,1 ??? ??? !!!
http://www.scribd.com/doc/79216203/Amounts-Due-to-Paris-Club-Creditor-Countries-2010-PP

These are the permenant members

Australia -Austria-Belgium-Canada-Denmark-Finland-France-Germany-Ireland-Italy-Japan-Netherlands-Norway-Russia-Spain-Sweden-Switzerland-United Kingdom and United States

Why are they holding meetings every 2 weeks in Paris CC ??

 

PP

Tue, 01/24/2012 - 11:36 | 2092462 Tense INDIAN
Tense INDIAN's picture

be short now for a day or 2..but dont forget to go long after 27th ......another high coming....

http://www.marketanthropology.com/

 

Tue, 01/24/2012 - 11:41 | 2092488 I am a Man I am...
I am a Man I am Forty's picture

OT:  does anyone think it is odd how much money Romney made on his money for 2010/2011, 42.5M on a net worth of approx $220M.  Over this time period he beat out 95% of hedge funds in a blind trust?

Tue, 01/24/2012 - 11:45 | 2092508 SillySalesmanQu...
SillySalesmanQuestion's picture

It's all of those "private" campaign contributions (bribes) made to him by "people" (corporations).

Tue, 01/24/2012 - 11:51 | 2092537 Hulk
Hulk's picture

Being allowed to legally trade with insider info has its advantages...

Tue, 01/24/2012 - 11:40 | 2092489 Seasmoke
Seasmoke's picture

its only a mild recession if your neighbor loses his job

Tue, 01/24/2012 - 11:47 | 2092519 slewie the pi-rat
slewie the pi-rat's picture

L0L0L0L0L0L!!!

christine wakes up, smells coffee...

Tue, 01/24/2012 - 11:53 | 2092545 cranky-old-geezer
cranky-old-geezer's picture

 

 

Government spending is a big part of GDP numbers these days. 

Government spending depends to a great extent on government borrowing.

What IMF is really worried about is collapse of the sovereign debt market, seriously reducing national governments' ability to borrow money.

LaGarde warned yesterday of a "global depression" if the sovereign debt market collapses.

Yes, it would plunge nations into all-out depression if that massive government borrowing and spending got cut off or seriously reduced.

But don't worry, it won't.  Central banks will find a way to keep printing and buying all the government debt on the market.

Of course it will debase currencies rapidly, robbing more wealth out of people's pockets and draining more wealth out of the economy, like we're already seeing, but IMF never cared about nations' economies anyway. 

IMF just wants to keep the sovereign debt ponzi scheme going.

 

Tue, 01/24/2012 - 11:54 | 2092548 prodigious_idea
prodigious_idea's picture

duh

Tue, 01/24/2012 - 12:18 | 2092619 AC_Doctor
AC_Doctor's picture

Fucking reality sucks, huhhh?  Equity and bond markets will soon realize this too.

Tue, 01/24/2012 - 12:14 | 2092621 PORTA PORTA
PORTA PORTA's picture

What about Nigeria ?? you remember Nigeria'w problems and IMF ?

Again.. Club de Paris involvement..!

http://www.scribd.com/doc/79215368/Resolving-Nigeria%E2%80%99s-Paris-Clu...

 

PP

Tue, 01/24/2012 - 12:40 | 2092784 Calmyourself
Calmyourself's picture

Umm that needs fixing 4% is actually 40% that was easy..

Whenever I read the "recovery is i ndanger of stalling" I know I am dealing with a pumper printing more debt to cover debt is not a recovery..  Even at 40%, the sheep will take it unless they get hungry.

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