IMF WORLD ECONOMIC OUTLOOK - IT'S REALLY ALL ABOUT MEASURING MOODS
By Ruma Dubey
The International Monetary Fund (IMF) put out a report yesterday on the World Economic Outlook. In many ways, the statistics actually tells us about the sentiments prevalent in these countries – where moods are somber, the growth rate is down and where moods are upbeat, the growth rate estimated is also good. Thus in many ways, though we try to always ‘quantify’ everything, putting them down in neat rows and columns, creating a mumbo of numbers, it all is always about the ‘quality’ – the numbers tell us the story of the quality of sentiments.
The ongoing geopolitical tensions seems to be the overriding emotion and that has dictated, rightly so too, the estimates. IMF has essentially downgraded its forecast on the global economy, stating that the world economy could expand by 3.4% in 2014 which is down from its April forecast, which it had made earlier this year at 3.7%. The forecast for April 2015 remains at 4%.
The downgrade, the IMF has blamed on the advanced or Western countries which are still grappling with low demand , despite lowest interest rates. For USA, it admits that recovery is underway and expects growth at 1.7% in 2014, expected to rise to 3% in 2015. That’s precisely how the sentiments in USA are now – cautiously optimistic.
On the other hand, the Euro is expected to continue to face difficulties, with balance sheet difficulties and high unemployment. The moods across Europe, barring probably Germany remains somber and even subdued in some parts. The statistics says exactly that – an uneven performance.
Currently moods against Russia are not, well, too friendly. The economic sanctions are a manifestation of this ‘unfriendly’ mood and IMF, recognizing this has downgraded growth and it estimated to grow by just a measly 0.2%, down from the previous forecast of 1.3%. On the other hand, IMF upgraded estimates for Japan, Germany and UK though the overall ‘sentiment’ of the report remained negative.
Talking about moods, currently it is buoyed in India due to the coming in of the new Govt; this is the period of enchantment or infatuation and anticipation of great things happening in the future are very high. Out of this BRICS, India was the only country to avoid a downgrade and said that this on account of improvement in business sentiments. The ground reality, for now, we the people of India know – inflation remains high, buying homes continues to remain a distant dream, interest rates are higher than inflation and demand, all around has not exactly shot up. The Budget came and went and now people are getting a little antsy while shelling out Rs.100/kg for tomatoes – wondering when will things really change; how much more time for those elusive ‘acche din’? We might see some more announcements on 15th August 15th and some grandiose plans are set to be announced on 6th Sept, the day when the Govt completes 100 days. Thus we have ‘days’ to look forward to, hoping things will finally change as promised.
IMF currently has expectations like Indians and has stated in the report that it expects investment to pick up gradually during the year and this might go a long way in offsetting the poor agriculture performance.
Thus coming back to our point – all statistics is actually always a reflection of the sentiments on the ground. Look at the estimated growth rate of the country and you will know the palpable mood on the streets there. After all, aren’t our stock markets also only about sentiments?
