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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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.

slaughterer's picture

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

Spooky Polish's picture

:) someone tooked them their prozac pills ... 

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.

DaveyJones's picture

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

WonderDawg's picture

I think their worst case scenario is still ridiculously optimistic.

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...

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.

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.  

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.


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.

GOSPLAN HERO's picture

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

Spooky Polish's picture

Bullish ! 

Bullshitish ! 


choose Yourself 

mtomato2's picture

Wow. Yay, indeed!

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

mtomato2's picture

Not that there is anything wrong with that

optimator's picture

As phoney and inflated as the market.

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).

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. 

nudlee's picture

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

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.

slaughterer's picture

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

lolmao500's picture
NYPD Reportedly Experimenting With Drones To Monitor NYC,0,6559085.story

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

battle axe's picture

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

mtomato2's picture

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

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.

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.

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. 

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.

mtomato2's picture

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



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.

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.

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. 

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.

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. 

marcusfenix's picture

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

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.

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+.

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.

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.

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 you apparently.  They (and you) still think we're under the original constitution. 

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. 

prodigious_idea's picture

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

rsnoble's picture

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

GeneMarchbanks's picture

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