IMF Cuts Global Outlook, Warns of U.S. Default Threat – Bloomberg 10-08-13

Salient to Investors:

The IMF said:

Advanced economies are gradually strengthening while growth in emerging-market economies has slowed. The effects of any failure to repay US debt would be felt right away, leading to potentially major disruptions in financial markets, both in the US and abroad, though this has a low probability of happening.

Its forecasts assume the Fed won’t raise its benchmark interest rate before 2016 and that the Fed will start tapering later in 2013.

Global growth will be 2.9 percent in 2013 and 3.6 percent in 2014.

The US will grow 1.6 percent in 2013 and 2.6 percent in 2014.

Emerging economies will grow 4.5 percent in 2013

Japan will grow 2 percent growth in 2013 and 1.2 percent in 2014.

The euro area will contract 0.4 percent in 2013 and grow 1 percent in 2014. Spain will contract 1.3 percent in 2013.

China will grow 7.6 percent in 2013 and 7.3 percent in 2014. Without fundamental reform to rebalance the economy toward consumption and stimulate productivity growth through deregulation, growth is likely to slow considerably.

Russia’s growth model is exhausted, and will grow 1.5 percent in 2013 and 3 percent in 2014.

India will grow 3.8 percent in 2013 and 5.1 percent in 2014.

Mexico will grow 1.2 percent in 2013 and 3 percent in 2014.

Developing economies’ sovereign yields are 0.8 percent higher than at the beginning of 2013, and poses risks for emerging-market economies, where activity is slowing and asset quality weakening.

Weaker growth in China will hurt commodities exporters and other developing economies.

The prospect of higher US long-term interest rates and a partial reversal of capital flows is leaving emerging markets with weak fiscal positions or higher inflation particularly exposed.

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Read the full article at  http://www.bloomberg.com/news/2013-10-08/imf-cuts-global-outlook-while-warning-of-u-s-default-threat.html

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