Think things were bad for the BRICs? They’re about to get worse, according to the IMF’s latest numbers. The IMF is forecasting the BRICs’ 2016 economies to be 8-14 percent smaller than it predicted just two years ago. Overall, the global economy will continue its sluggish recovery, with particular “downside risks” in the emerging economies and the Eurozone. The Telegraph:
“Global growth remains in low gear. A likely scenario for the global economy is one of continued, plausible disappointments everywhere,” said the IMF. The gloomy ‘tour d’horizon’ suggests once again that frothy markets fuelled by easy money have decoupled from underlying reality of stagnant output. […]The BRICS malaise is of a different character. The IMF said the a string of economies are caught in a classic Phillips Curve trap, with sticky inflation even as growth plummets. This mix is a sign that the problems go deeper than the boom-bust effects of the credit cycle. Their economic speed limit has slipped badly, implying “serious structural impediments”.
It’s possible that in its initial enthusiasm for the BRICs, the IMF missed tell-tale signs that growth would slow down. In particular, India and Mexico had their projected growth rates cut by more than 1.5 percent per year in the IMF projections. The struggling nations of Southern Europe will continue their plummet through the end of the decade. For China, wage increases and modernization mean a departure from its cheap-labor growth model.The only good news in the IMF’s report comes from the Anglosphere. The IMF acknowledges that growth may still be slower than many would like, but the US and UK will still lead the rest of the lagging world economy. The once abundant predictions that the US would be overtaken by the emerging markets have, for now, been put to rest.[BRICS leaders image courtesy of Blog do Planalto]