When the International Monetary Fund updated its economic outlook on Tuesday, it took a red pen to 2011 and 2012 growth projections for just about every region of the world -- a downgrade that is startling in its widespread nature.
The highlights, of course, are the overall figures: The IMF now sees the world economy growing by 4 per cent in both 2011 and 2012, down 0.3 per cent and 0.5 per cent, respectively, from an earlier forecast made in June. Optimists might point out that 4 per cent growth is none too shabby, but the specifics don't look nearly as upbeat.
The U.S. economy is expected to grow a mere 1.8 per cent in 2012, a cut of 0.9 per cent from the IMF's previous forecast that is the biggest cut among all regions and countries, save for Italy. Canada didn't fare much better in the IMF's estimation, though, with expected growth of 1.9 per cent in 2012, down 0.7 per cent from the earlier forecast.
For his part, Bank of Canada governor Mark Carney reiterated his view that the risk of another U.S. recession has risen, but he doesn't expect a recession to actually occur. ``The U.S. economy is close to stall speed, where a negative feedback loop between weak employment, consumer demand, and business hiring and investment could emerge," Mr. Carney said in remarks delivered to a business audience in New Brunswick. "The possibility that markets themselves could tip the balance cannot be dismissed.''
But back to the IMF forecasts: Even emerging markets, and China in particular, did not escape downgrades to growth expectations -- which, as The Economist's Free Exchange blogger points out, suggests that "decoupling is and will likely remain an incomplete phenomenon."
The IMF expects emerging and developing economies to grow by 6.1 per cent in 2012, down 0.3 per cent from the earlier forecast. China is expected to grow at a significantly faster clip of 9 per cent -- down from a forecast of 9.5 per cent -- but keep in mind that the country is used to far more robust growth: In 2010, the economy expanded by 10.3 per cent, and even in the depths of the financial crisis and global recession in 2009, it grew by 9.2 per cent.
"A Chinese collapse is unlikely, but I suspect that the era of double-digit growth is over," The Economist noted. "Growth will henceforth be tempered by the need to address substantial structural problems across the economy."
David Berman