Salient to Investors:

The IMF says:

  • The global economy will expand 3.3 percent in 2013 versus its 3.5 percent forecast in January, and 4 percent in 2014.
  • The euro area will contract 0.3 percent in 2013 versus its forecast of a 0.2 percent retreat in January.
  • Expect a 3-speed recovery led by emerging markets including China, the US forging ahead, and Europe trailing.
  • A 50 percent chance of a recession in the euro region is the most immediate threat to global growth.
  • Japan will grow 1.6 percent in 2013 and 1.4 percent in 2014.
  • The US will grow 1.9 percent in 2013, and 3 percent in 2014 due to a recovering housing market, improving confidence and the Fed’s accommodative monetary policy.
  • Advanced economies have defused the two biggest threats to the global recovery: a splintering of the euro region and the US fiscal cliff.
  • Italy will contract 1.5 percent in 2013, Spain will contract 1.6 percent, and France will contract 0.1 percent.
  • The ECB has room to cut interest rates further.
  • Germany will grow 0.6 percent versus 0.9 percent in 2012.
  • Developing economies will grow 5.3 percent in 2013 versus  5.1 percent in 2012.
  • Developed countries will grow 1.2 percent in 2013.
  • China’s will grow 8 percent in 2013.
  • India will grow 5.7 percent in 2013.
  • Brazil will grow 3 percent in 2013 and 4 percent in 2014.
  • Inflation remains under control and commodity prices will decline 2 percent in 2013 as supplies increase for raw materials including crude oil and grain.
  • Currencies generally have responded appropriately to recent changes in macroeconomic policies and falling risk aversion.

Olivier Blanchard at IMF said:

  • The main challenge is still very much in Europe, where the financial system is still not in great shape.
  • There is a growing bifurcation between the United States and the euro area. Given the strong interconnections between countries, an uneven recovery is also a dangerous one, and Germany’s slow growth may question its ability to help the periphery.
  • Fundamentally attractive prospects in emerging markets, plus low interest rates in advanced economies, will continue net capital inflows and exchange-rate pressure in many emerging market economies – necessary global rebalancing for the world economy to return to health.

Christine Lagarde at IMF said monetary policy is spinning its wheels because of insufficient financial repair, and the priority must be to continue to clean up the banking system by recapitalizing, restructuring, or shutting down banks.

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