São Paulo – The International Monetary Fund (IMF) forecasts deceleration of the global economy, caused by the fiscal crisis in Greece and the slow recovery of the United States. On the other hand, the organisation believes that developing economies, like Brazil, have been presenting vigorous growth and are even giving signs of “excessive heating”, according to report “World Economic Outlook”, disclosed on Friday (17) in São Paulo. Perspectives in this edition of the document, however, are more modest than those disclosed in April. At the occasion, the Fund forecasted growth of 4.5% of the country’s Gross Domestic Product (GDP) in 2011. Now, it has been reduced to 4.1%.
To the IMF, the villains of global recovery at the moment are the United States and some European nations, mainly Greece. The country has been living a crisis since 2009 and needs fiscal adjustment. The IMF has agreed to make a loan to Greece and should send part of the money in coming days. But the funds will only be made available if the neighbouring European nations agree to pay the debt if Greece defaults. The Greek fiscal situation is threatening to contaminate other nations.
In the United States, the government of president Barack Obama is having a hard time approving changes in public expenditure. The rate of unemployment, currently at 9.1%, is not dropping at the expected rate. However, the fund forecasts that the country should manage to reduce its nominal deficit to 9.9%. The previous projection was a 10.8% deficit. In April, the organisation projected growth of 2.8% of the North American economy in 2011. Now, it believes that it should grow no more than 2.5%.
The situation in Japan is also concerning. According to figures disclosed by the IMF, the Asian country should end the year with an 0.7% smaller GDP than in 2010. The previous projection had been for growth of 1.4%. The reason for the deceleration of the Japanese economy is the earthquake that destroyed factories and affected the country’s production. The natural disaster in Japan is also having a result in the United States, one of the main buyers of Japanese products.
While developing nations are suffering to escape the crisis, developing nations are living another reality. They need to control their heated economies so that inflation will not contaminate their markets.
"The news is good for Brazil, but not for the Americans. This is the consequence of fiscal adjustment made by Brazil, which is more responsible in its fiscal and economic policies,” said the director of the IMF research department and the organisation’s chief economist, Olivier Blanchard.
The report points to strong growth of developing nations. China should growth of 9.6%, India, 8.2%, Brazil, 4.1%, and Russia, 4.8%. The growth forecasted for the region in Latin America and the Caribbean in 2011 is 4.6%. According to the deputy head of the global economy studies at the IMF, Rupa Duttagupta, the forecasted growth for Brazil was revised down for two reasons: “The government has increased interest rates and promoted a fiscal tightening to control inflation, which was rising significantly,” he said.
Inflation is not a problem for Brazil alone, but also for most developing economies. To the IMF, the growth of prices is the result of “overheating” causing high demand and commodity prices. Starting in June, however, the organisation believes that the price of commodities should stabilize. Blanchard evaluated that the growth of emerging economies is not the fruit of external factors alone, but also depended on adequate economic policies.
The countries of the Middle East and North Africa should also grow this year. According to Rupa, thanks to exports of commodities, especially oil, the IMF has revised the region’s 2011 GDP up: from 4.1% in April to 4.2% now. Blanchard, however, stated that it is hard to plot long-term forecasts for the region, which is living a wave of public protests and civilian fights.
*Translated by Mark Ament
