IMF: “Subdued Demand, Diminished Prospects”

From today’s updated World Economic Outlook update:

Risks to the global outlook remain tilted to the downside and relate to ongoing adjustments in the global economy: a generalized slowdown in emerging market economies, China’s rebalancing, lower commodity prices, and the gradual exit from extraordinarily accommodative monetary conditions in the United States. If these key challenges are not successfully managed, global growth could be derailed.

weo_update0116_tab1

Excerpt from Table 1, IMF World Economic Outlook Update, January 2016.

Note the deceleration in emerging markets. Commodity prices have also been marked down, relative to the last WEO (not shown above). I appreciate Chief Economist Maury Obstfeld’s characterization in his blogpost:

We may be in for a bumpy ride this year, especially in the emerging and developing world.

In his outline for action, he notes three areas:

Need for action
In advanced economies, currently projected growth rates are too low rapidly to reduce high unemployment and other legacies of recent crises, or to spark strong growth in real wages. In emerging and developing economies, currently projected growth rates substantially slow convergence to higher incomes. Action is needed. Policy recommendations must be country-specific, but at a general level there are three priorities.

First, to support aggregate demand in the face of subdued activity and, in some countries, continuing deflationary pressures.

Second, to support economic efficiency and long-term economic growth in the face of evidence that potential growth rates have fallen worldwide over the past decade. An important element here is structural reform, which will be a main theme of the April 2016 World Economic Outlook.

A final need is to further strengthen and widen the international safety net, bolstering global resilience to whatever may lie ahead.

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11 thoughts on “IMF: “Subdued Demand, Diminished Prospects”

  1. PeakTrader

    The U.S. needs stronger demand to be a stronger engine of growth to help pull the economies of the rest of the world.

    Student loan debt and Obamacare have dampen demand.

    A higher minimum wage will raise the labor force participation rate.

    Reducing the tax and regulatory burdens on entrepreneurs will spur business start-ups and facilitate expansions.

    1. AbeI

      “… and Obamacare have dampen demand.” – Please sight your source on this. As more people are insured there is a greater need for Health Care (both workers and Medical services) which has a positive impact on demand. In states which have adopted Medicaid expansion the impact on state budgets has largely been positive as the costs are covered by the federal budget and there is less demand for unreimbursed medical treatments.

      As to “Reducing the tax and regulatory burdens… will spur business start-ups…”, sounds nice, unfortunately no conclusive studies that illustrate it.

      1. PeakTrader

        Many Americans are forced to buy health insurance and if they can’t afford the deductible, they won’t use It.

        Also, many businesses are forced to provide health insurance to full-time employees.

        The result is lower demand and higher labor costs.

        1. baffling

          peak, you have failed to show how obamacare reduced demand. for most americans, obamacare had no effect, so it has no impact in the way you are arguing. for many who signed up for obamacare, they have health insurance and are subsidized for the cost if their economic profile allows. hence there is no reduction in demand. if you want to make this argument, you need to do a better job of actually showing a reduction in demand, other than saying this is what you believe will happen. the evidence thus far appears to be against those in the anti-obamacare argument. it has not been the detrimental policy so many had warned about.

          1. PeakTrader

            Baffling, you’ve failed to understand how being forced to pay for health care premiums and deductibles or pay fines/taxes reduces demand.

            Moreover, how higher labor costs reduces employment and therefore demand.

            Some people simply cannot afford luxury goods, like health care.

            Patients with High Health Insurance Deductibles Use Fewer Imaging Tests
            January 14, 2016

            “In the first nationwide study to directly address the associations between high-deductible insurance plans and the use of diagnostic imaging, researchers including Kimberley Geissler at the University of Massachusetts Amherst found that patients enrolled in such health plans use about 7.5 percent fewer diagnostic tests such as MRI, X-rays and CT scans, than patients without such plans.

            She notes that more Americans are enrolling in high-deductible insurance plans in recent years because they offer relatively low monthly premiums but higher out-of-pocket costs; most plans on the newly created health insurance exchanges are high-deductible insurance plans.”

          2. baffling

            “Baffling, you’ve failed to understand how being forced to pay for health care premiums and deductibles or pay fines/taxes reduces demand.”

            and you’ve failed to acknowledge those people obtain premium support. perhaps they do not obtain coverage and pay the deductible, but they also do not pay the premium.

            higher deductible plans have been on the market for a while, before obamacare. it is false to imply this issue is a result of obamacare. i have had access to such policies for years. in addition, the number of people on obamacare exchanges is relatively small compared to the rest of the employed population. you are overweighting their influence as an anti-growth factor.

            “Patients with High Health Insurance Deductibles Use Fewer Imaging Tests”
            and how much imaging is done on the people that do not have health insurance at all? you prefer we have a significant population without access to health care at all?

          3. PeakTrader

            Everyone has access to health care in the U.S. whether they pay high premiums and deductibles or not.

            Thanks to Obamacare, you have a lot of people paying more for less and you have scarcity for a lot of other people.

            Of course, this reduces demand. The goal should be more health care at lower prices for everyone.

            You don’t even realize Obamacare changed health care plans, including yours.

          4. baffling

            “Everyone has access to health care in the U.S. whether they pay high premiums and deductibles or not.”

            that is an extremely disingenuous statement. in the past, this was true only through the emergency room. most people would not consider that health care, but emergency care. obamacare is an effort to provide more, and fair, access to health care for many more people. that is a good thing. you seem to think otherwise.

            “Thanks to Obamacare, you have a lot of people paying more for less and you have scarcity for a lot of other people.”
            pretty big statement. prove it. otherwise it is simply your ideology speaking-as usual.

            “You don’t even realize Obamacare changed health care plans, including yours.”
            actually it did not change my health care plan any more than the yearly changes prior to obamacare. disingenuous statement again.

          5. PeakTrader

            You just make things up.

            Proof doesn’t matter to you when it threatens your rigid ideology.

            We need a much more efficient health care system that raises health care and reduces prices.

            Then, we can afford to help the most needy.

          6. baffling

            “We need a much more efficient health care system that raises health care and reduces prices.”

            republicans had many, many years when they could have addressed the problem and provided a possible solution. they NEVER provided a solution. most likely, because they are not actually interested “helping the most needy”. you had eight years under bush to develop a plan-and punted. you lost the right to outrage and dissent by sitting on your hands instead of acting. now you need to deal with the reality of obamacare. this howling and crying is simply a pathetic response to the remorse of lost opportunity.

      2. PeakTrader

        Federal regulations alone cost about $2 trillion a year before the massive increase in regulations over the past few years, and taxes have become more progressive on the “middle class.”

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