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IMF World Economic Outlook

Lighthouse Investment ManagementAlexander Gloy is founder and president of Lighthouse Investment Management




The IMF’s (International Monetary Fund) “World Economic Outlook”, a slim 250-page piece, came out.

Some excerpts:

Substantial reductions in estimated output (GDP) growth for 2013 for all major countries:

World Output IMF World Economic Outlook

World Output IMF World Economic Outlook - Click to enlarge


Unemployment in the Euro-Area (“EA”) is now expected to rise above the level in the Middle East and North Africa (“MENA”) in 2013.

An end to the recession in the Euro-Area has been pushed back from Q4 2012 to Q2 2013.



Unemployment - Click to enlarge


For the Periphery (the PIIGS), it has been pushed back from Q1 2013 to Q3 2013:

Real Growth Euro Area vs. Periphery IMF World Economic Outlook

Real Growth Euro Area vs. Periphery - Click to enlarge


Desperate central banks are depicted in these two charts, showing total central bank assets in percent of GDP. Interestingly, the two “winners”, China and Switzerland, saw their balance sheets expand not because of buying local assets but because of buying foreign exchange in an attempt to prevent their own currency from appreciating:


Central Bank Total Assets IMF World Economic Outlook

Central Bank Total Assets: BoJ Fed ECB BoE - Click to enlarge


Despite the manic printing of money, global headline and core inflation rates (excluding volatile or seasonal food and energy price changes) remain low

Global Headline Inflation IMF World Economic Outlook

Global Headline Inflation (IMF Outlook) - Click to enlarge


On the Euro-Area: “The euro area crisis could re-intensify again. The OMT [Outright Market Transactions, the replacement of SMP, = further buying of PIIGS government bonds by the ECB] program will reduce risks from self-fulfilling market doubts related to the viability of the Economic and Monetary Union (EMU) most effectively if it is implemented decisively. However, serious risks remain outside this safety net – posed, for example, by rising social tensions and adjustment fatigue that raise doubts about adjustment in the periphery or by doubts about the commitment of others to more integration.”


Recession Deflation Danger IMF World Economic Outlook

Recession Deflation Danger - Click to enlarge

The probability of recession for the Euro area has been increased from 50% (April forecast) to 85%.

“Public debt has reached very high levels, and if past experience is any guide, it will take many years to appreciably reduce it.”

“Despite policy progress, the euro area crisis has deepened. Unless recent ECB actions are followed up with more proactive policies by others, the WEO (World Economic Outlook) forecast may once again prove overly optimistic and the euro area could slide into the weak policies scenario, with deleterious consequences for the rest of the world.



Yes, the IMF’s forecasts once again (as over the last five years) proved overly optimistic.



Lighthouse Investment ManagementAlexander Gloy is founder and president of Lighthouse Investment Management

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About Alex Gloy
Alex Gloy
Alex Gloy: Founder, President and Chief Investment Officer of Lighthouse Investment Management Born in Hamburg, Germany, Mr. Gloy started his financial career as a trainee in the Deutsche Bank Apprenticeship Program at the Hamburg Stock Exchange. He graduated from the University of Fribourg (Switzerland) with an MBA in 1994. Following his MBA he joined Credit Suisse, Zurich, in European Equity Sales. Mr. Gloy then served as the German Equity Market Strategist before heading the European Equity Research Team in Credit Suisse Private Banking. After moving to New York in 1999 he worked in Swiss and European Equity Sales. Mr. Gloy spent the last three years at Sal. Oppenheim as Head of their Swiss Equity Sales Desk. From 1994 to 1998 he continued to work with his Alma Matter and its Institute of Finance, preparing students for their final Finance exam.
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1 comment

  1. George Dorgan
    George Dorgan

    The IMF data is of Q2/2012, so they lag a bit.
    As I pointed out already in August, stocks are overvalued, at least against Gordon’s growth model.

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