IMF Meetings Takeaways – Deutsche Bank
Research Team at Deutsche Bank, lists down the key takeaways from the most recent IMF meeting.
Key Quotes
“Slowing
growth momentum, particularly in China, EU, Japan, and the US, is seen
as fait accompli. While there is some marginal optimism about the
service sector in China and labor market in the US, the consensus view
appears to be that there is little upside to global growth this year.
While the IMF sees some upside to China’s near-term growth outlook, it
has scaled back its global growth projection for 2016 to 3.2% (20bps
lower than the previous projection).
Indeed, the global growth
outlook for the rest of the decade is subdued. Factors such as economic
rebalancing, aging, disruptive technologies, trade stagnation, and
rising inequality are seen as brakes to growth in the near and medium
term. There is however optimism about some EM economies as they adjust
to terms of trade shocks and political changes. After several years of
exchange rate correction and deleveraging, some commodity producers
appear to have fully priced in the downside, with the balance of risks
improving.
With no emerging or developed economy capable of
supplanting the slowing of demand in China, EU, Japan, and the US, there
is a sense of resignation that further monetary easing has vastly
diminished utility; there is also little appetite for major fiscal
intervention. There was the usual discussion on the need for structural
reforms and economic recalibration to at least create room for better
quality growth, but generally speaking, there was a striking dearth of
fresh or galvanizing policy prescription.
On global factors,
NPLs and financials’ structural profitability issues in the EM were
popular. As profitability and inflation are highly correlated, the
limitations of monetary policy and the need of a different - more
powerful - policy mix were in focus. On oil, low-for-long and the fact
that commodity sectors account for a large share of expenditures (when
commodities and materials are combined) underpinned the bearish view on
investment over the next couple of years – at least.”
