7 days of Economics: Eurozone, what does weakening sentiment tell us about growth?
08/02/2019
Each week, the Economic Research Department of BNP Paribas reports on economic news.
- Rebound in world economic growth still expected in 2017
- Rising risks in emerging countries
The IMF published this week updated economic forecasts. 2016 world growth would remain the same as in 2015 (3.2%) and accelerate only slightly in 2017(3.5%). Regardless of what has been said in the media, the IMF is not especially alarming, with the exception of Japan. The underlying assumptions are about resilience: the US economy would not decelerate despite the collapse of investment in the shale oil & gas sector and the appreciation of the dollar; emerging countries would resist the slowdown in China, and the Brazilian and Russian recessions, even though non-oil commodity prices are not expected to recover until end-2007. But the IMF points out mounting downside risks. First, the slowdown in potential growth that reflects a lack of investment (see “US: Potential problem”). Lack of investment is actually the main reason why growth forecasts for the Eurozone is capped at 1.6%. The IMF chief economist is urging governments benefiting from “fiscal space” to take advantage of low real interest rates to invest in infrastructure. Second: a hard-landing in China and no stabilization in either Brazil or Russia. The Chinese authorities are facing two conflicting goals: supporting growth and reducing the overall leverage of the economy, while Brazil and Russia both need a rebound in commodity prices and a relaxation of tensions, either domestic (Brazil, see “Brazil: Rebuilding confidence for a fresh start”) or international (international restrictions for Russia).
François Faure
- Know more:
- United States: Potential problem