IMF Report Wrong On 2017 Forecasts

The IMF Report offers delayed projections which means it confirms data trends we’ve been seeing for months. It’s a great summary of world growth since I don’t cover every country’s economy in my articles.

 Some people mistakenly view IMF Report forecasts as always being wrong. Skeptics might say the last time growth was downgraded was in 2016. That was a mistake as growth was bottoming just as the negative revision was made in July 2016.

A delayed projection is always going to get the forecast wrong if the growth trend reverses. It’s very difficult to capture rate of change reversals. Expecting alpha from the IMF Report is futile.

This report gives you an idea of what is priced into the markets. Invest in the countries you are more bullish than the IMF on and bet against the ones you’re more bearish than it on.

As I mentioned, the IMF Report was wrong to downgrade growth in July 2016. Its expectation for global growth in 2017 fell from 3.5% to 3.4%.

Instead of downgrading growth, it should have upgraded growth. As you can see from the table below, 2017 growth was 3.7%. Advanced economies grew 2.3% instead of 1.8%. Emerging markets grew 4.7% instead of 4.6%.

America missed estimates for 2.5%, coming in at 2.2%. Europe and Japan destroyed estimates for 1.4% and 0.1% growth, coming in at 2.4% and 1.7%.

IMF Report Lowers Global Growth Projections

Now let’s look at the latest projections for 2018 and 2019. As you can see, estimates for 2018 and 2019 GDP growth declined 0.2% each to 3.7% for both years.

The projections for 2018 growth aren’t that difficult to make since most of the data is already in. American growth is expected to have accelerated from 2.2% to 2.9% because of the fiscal stimulus.

With the stimulus wearing off and the trade war with China gaining steam, the IMF Report lowered global trade volume growth estimates for 2018 and 2019 by 0.6% and 0.5% to 4.2% and 4%. NAFTA and Brexit are catalysts for uncertainty.