Economic realities continue to bite

During the Great Recession of 2009 the Keysnian strategy returned as governments threw money into the markets to aid recovery and to avoid the collapse into a second depression. Europe, driven by Germany and Britain, had opted for austerity by late 2010.

The IMF released its latest Economic Outlook and made some very interesting statements. It warned that an “uneven recovery is also a dangerous one” for the global economy as it downgraded its growth forecasts for 2013 for the second time.

The downward revision for the 2013 global growth forecast was only 0.2 percentage points to 3.3 per cent but it did not change it projects for 2014 (4%). The exception to this pessimism is Japan, where the IMF is more optimistic following the Abe Government’s efforts to defeat deflation through its revolution on monetary policy. Read here a revision to Keynsian growth policies of spending your way out of trouble.

Japan is the only country to have a 2013 growth rate improvement since the recent January 2013 forecast. The US is projected to grow by 1.9% against the Eurozone declining by 0.3% but with the Mediterranean countries facing substantial contraction.

The IMF urged the Eurozone countries with the means to do so (Germany) to ease its restrictive measures and called on Britain to “consider less” austerity.

The sub-title of the outlook is ‘Hopes, Realties and Risks’ with the latter referring to the stagnation that is being caused by fiscal policies that have applied to much austerity.

Asian and emerging market economies are, however, projected to show more growth. The IMF expressed it as a “3 Speed” world. What this means for the Western Hemisphere port sector is that demand will remain low to stagnant – shown in the drop of Eurozone vehicle sales by over 18% in March – and as a consequence we shall continue to see excess capacity chasing too little volume.