No recovery until 2018? A curious silence…

Big headlines on the IMF’s latest thoughts on the financial crisis in the media last week. Well. The UK media that is.

“No recovery until 2018, IMF warns” says the Guardian. And on the right the Telegraph phrased it slightly differently ‘IMF: Global recovery ‘will take at least six more years’

And the details?

The International Monetary Fund’s chief economist has warned that the global economy will take a decade to recover from the financial crisis as the latest snapshot of the UK economy suggested that growth in the third quarter will be at best anaemic.

Olivier Blanchard said he feared the eurozone crisis, debt problems in Japan and the US, and a slowdown in China meant that the world economy would not be in good shape until at least 2018. “It’s not yet a lost decade,” he said. “But it will surely take at least a decade from the beginning of the crisis for the world economy to get back to decent shape.

Now, one could interpret that as meaning that by 2018 all will be well. That’s six years away. But then again if one reads it carefully it seems to suggest that only in 2018, and perhaps later, that it will only just get back into ‘good shape’.

One might think that the Irish Times (or indeed RTÉ) might have had something to say about a prediction that would – if it is at accurate – have at least some implications for this state and its finances? Something that would have an mpact on the words Eamon Gilmore so easily spoke hardly a month ago in Carton House – and most certainly an impact on the potential prospects for both Labour and Fine Gael if growth is not forthcoming as they enter the home stretch to the next election, something that would cause headaches (and worse) for the economic models down at the ESRI – let alone the IMF itself and the ECB. Yes indeed. So, what did the Irish Times have to say about this?

Nothing. Nothing at all.

Now, perhaps they thought his words weren’t important enough. Which is odd, because in July they were happy enough to quote him when the IMF then cut growth forecasts. And in July they quoted him when he argued for the Eurozone to step up bank recapitalisation. And so on and so forth.

Meanwhile, what of the Central Bank’s latest missive in its quarterly bulletin, one which is so tinged with bad news that it’s hard to know where to start. It argues wages in public and private sectors are still too high – 10% or so. It wants the deficit cut more quickly. It says unemployment will increase.

And sentiment?

Today’s quarterly bulletin also said a recovery in consumer sentiment is expected to contribute to a stabilisation in spending this year, but a modest decline is predicted for next year.

And as for growth…

GDP was expected to slow to 0.5% growth in 2012 compared to a previous estimate of 0.7%.
It predicted that GNP will contract by 0.4%.

But…

That is expected to be followed by a pickup in growth next year to around 1.7% in GDP terms and 0.7% in GNP terms.
The bank has based its projection on some recovery in external demand next year, alongside a gradual stabilisation in the domestic economy.

How, how is this possible? Blanchard doesn’t appear to believe it is likely that the global economy will improve for perhaps five years to come, or at least not significantly enough to be termed a ‘recovery’ until that point. And this state – as we’ve been told ad nauseam is particularly open (second most open economy IIRC internationally). So how does the Central Bank think we’re going to buck these trends? It can’t be from the policy proscriptions already implemented, almost all those indicators are downhill – and have been so for years now. So where is even the mildest uptick going to come from?

BTW, even George Osborne agrees with Blanchard in the context of the UK economy (though one suspects it troubles him not in the slightest).

About these ads