The International Monetary Fund sees growth in the Australian economy marking time over the remainder of 2010, compared to its April forecast, according to an update of its 2010 World Economic outlook issued yesterday.
That’s despite the IMF upgrading its world growth forecast for 2010 because of "stronger activity during the first half of the year’’.
In fact, while growth in many advanced economies will slow, there’s no sign of a double dip recession in the global economy in the IMF’s figures.
At the same time the IMF warned that downside risks to world growth have intensified and it has clipped its growth estimates for Europe as "downside risks have risen sharply amid renewed financial turbulence’’.
It said in the update that, "The new forecasts hinge on implementation of polices to rebuild confidence and stability, particularly in the euro area’’.
The IMF said it saw Australia benefiting from the "still-robust commodity prices boosting private domestic demand’’.
(As we saw with yesterday’s very strong jobs figures for June.)
It predicts Australia will grow by 3% in calendar 2010, accelerating to 3.5% in 2011, as it did in April.
That is still a stronger outlook than that of the advanced economies as a whole where economic growth is forecast to slow from 3% in the June half to 2% in the December half.
Growth in Japan, the US and Europe is forecast to ease over the course of 2010 as government stimulus spending falls away.
The forecast for world growth was pushed up to 4.6% this year, from 4.25% previously, while leaving its 2011 forecast unchanged at 4.3%.
For developing Asia – including China and India – it has raised its 2010 forecast to 9.2% from 8.7% previously, but it trimmed its 2011 estimate to 8.5% from 8.7% because of the impact of the recent financial market turbulence.
The Fund says China will grow at 10.5% in 2010 (the second quarter figures are out next Thursday and are expected to show a slowing from the rapid 11.9% rate of the first quarter), but this will slow to 9.6% next year.
India will grow at 9.4% this year, slowing to an 8.4% rate in 2011.
Japan will fall from 2.4% this year to 1.8% next year and is the worst performing of our major export outlets.
In fact, ignoring Japan, the rest of Asia will save global growth this year and next, while Japan, Europe and the US meander along at sub optimal rates of growth.
The IMF downgraded growth for the euro zone next year by 0.2 percentage points, to just 1.3%; growth estimates for Germany, France, Italy and Spain have all been cut.
The growth forecast for Britain next year has also been cut, by 0.4 percentage points to 2.%, reflecting the impact of the push towards austerity.
"Asia has only limited direct financial linkages to the most vulnerable euro area economies, but a stall in the European recovery that spilled over to global growth would affect Asia through both trade and financial channels,’’ the Fund said yesterday.
"Many Asian economies are highly dependent on external demand, and their export exposure to Europe is at least as large as their export exposure to the United States.
"Asia has only limited direct financial linkages to the most vulnerable euro area economies, but a stall in the European recovery that spilled over to global growth would affect Asia through both trade and financial channels.
"Many Asian economies are highly dependent on external demand, and their export exposure to Europe is at least as large as their export exposure to the United States.
"As always, these world growth rates hide a large difference between and within advanced and emerging and developing economies, with the United States expected to grow at about 3.25% in 2010, the euro area at 1%, Japan at close to 2.5%, and emerging and developing economies averaging about 6.75%.
"Also, the overall numbers do not reveal an important difference between the first and the second half of this year."
For advanced countries for example, growth in the first half is forecast to be 3%, while growth in the second half of the year is forecast to be only 2%, reflecting a slowdown in private demand growth, The IMF chief economist, Oliver Blanchard, said yesterday in a statement.
In the IMF’s accompanying update of its Global Financial Stability Report it says the progress toward financial stability experienced a setback in late April and early May.
"Banks again have become less willing to lend to one another … especially to banks in the euro area countries perceived to be facing greater policy challenges.
"Spillovers between sovereigns and the banking system increased market and liquidity risks.
"Banks again have become less willing to lend to one another, except at the shortest maturities, especially to banks in euro area countries perceived to be facing greater policy challenges.
"Moreover, financial asset price volatility increased and investor risk appetite declined.
"Such financial risks have raised the chances of re-establishing an adverse feedback loop to the economy, though to date there is little evidence of this.
"The most acute market stra
