Tag: IMF

On 21st April the IMF published its latest World Economic Outlook. It forecasts that the output of the world economy will grow by 4.2% in 2010, following last year’s 0.6% contraction, and by a further 4.3% in 2011. However, the Foreword to the report identifies considerable economic uncertainties. In particular, it identifies ‘fiscal fragilities’ and, hence, a ‘pressing need’ for fiscal consolidation. But, it also points to the need for policies ‘to buttress lasting financial stability’.

The IMF notes that Europe has come out of the recession slower than other parts of the world. For the EU-27 it is predicting growth of 1.0% this year, following a contraction of 4.1% last year, but with growth remaining at 1% in 2011. The UK is forecast to grow by 1.3% this year, following a contraction of 4.9% last year, and by a further 2.5% in 2011. Therefore, economic growth in the UK is forecast to be stronger than that across the European Union in both 2010 and, in particular, in 2011.

If we look at the expected growth in some of the principal components of the UK’s aggregate demand we see signs of a ‘rebalancing’. Firstly, household spending, which contracted by 3.2% last year is expected to rise by 0.2% in 2010 and by 1.4% in 2011. Secondly, general government current expenditure, which grew by 2.2% last year, is forecast to grow by 1.3% this year but, as the expected fiscal consolidation kicks in, will fall by 1% in 2011. Thirdly, gross fixed capital formation (capital expenditures) which fell by some 14.9% in 2009 is forecast to fall this year by a further 2.6%, before growing by 4.7% in 2011.


World Economic Outlook, April 2010 IMF


IMF Raises 2010 Growth Outlook, Says Government Debt Poses Risk Bloomberg Businessweek, Sandrine Rastello (22/4/10)
GDP figures: what the experts say Guardian (23/4/10)
IMF cuts UK forecast in blow to Gordon Brown The Telegraph, Angela Monaghan (22/4/10)
IMF maintains U.K. 2010 forecast at 1.3 per cent Bloomberg, Svenja O’Donnell (21/4/10)
Global recovery faster than expected, says IMF BBC News (21/4/10) )
IMF nudges up world GDP view; fiscal fears mount Reuters, Lesley Wroughton and Emily Kaiser (21/4/10)


World Economic Outlook Reports IMF
World Economic Outlook Databases IMF
For macroeconomic data for EU countries and other OECD countries, such as the USA, Canada, Japan, Australia and Korea, see:
AMECO online European Commission


  1. What economic uncertainties do you think might affect the forecasts of economic growth for both the world and UK economies? Would you expect these uncertainties to be less or more significant in the UK?
  2. What do you understand by the term ‘fiscal consolidation’? Why do you think the IMF are highlighting this as a concern?
  3. Why do you think growth across Europe has been lagging behind other parts of the world? What might explain why growth in the UK is expected to be above that across Europe over the next two years?

We have all heard about the troubles of Greece, but are things really that bad? It does have huge debts, which is costing about 11.6% of GDP to service; and estimates suggest that government borrowing will need to be €53bn this year to cover budget shortfalls. Furthermore, its situation could spell trouble for the eurozone and in particular for certain countries. However, as the article below discusses, Greece still has some trump cards to play.

Advantage Greece BBC News blogs, Stephanomics, Stephanie Flanders (3/3/10)


  1. “The single most important factor propping it (Greek debt) up in the past year has been that it can be swapped for free money at the ECB.” How does this prop up Greek debt?
  2. If Greek debt does fall in value, how will other members of the Eurozone be affected?
  3. Why are countries such as France and Germany hostile to a loan to Greece from the IMF?
  4. If Greece was to collapse, which countries do you think could potentially follow? Which factors have influenced your answer?

The G20 countries meet each year. Normally their meetings are full of fine words resulting in little action. But at a summit in London on 2 April 2009, the fear of a deepening global recession focused minds and a package of measures worth over $1 trillion was agreed to stimulate trade and growth. This included $750 billion for the IMF to help economies in severe difficulties, $250 billion for financing world trade and $100 to multilateral development banks (such as the Asian Development Bank) to provide extra aid to the poorest countries.

The extra money for the IMF would include $500 billion of loans from member countries and £250 billion in new money – a form of international quantitative easing. This new money would be in the form of ‘special drawing rights’. These are denominated in dollars and are created by the IMF to be drawn on by countries in difficulties.

There was also agreement to tighten financial regulation and to resist protectionism. A ‘Financial Stability Board’ would be set up and work with the IMF to design a strengthened regulatory system for banks and other financial institutions and for financial markets and instruments.

The following articles look at the agreement and its likely effects.

‘This is the day the world came together to fight back’ Independent (2/4/09)
G20 communiqué: Point by point analysis Telegraph (2/4/09)
G20 summit – leaders’ statement. Full text of the communiqué Guardian (2/4/09)
G20: Economic summit snapshot BBC News Online (2/4/09)
G20 leaders seal $1tn global deal BBC News Online (2/4/09)
G-force The Economist (2/4/09)
World leaders declare war on risk Sydney Morning Herald (3/4/09)

Postscript (Sept 2009)
G20: What progress has been made? BBC News (23/9/09)
G20: Pledge by pledge BBC News (25/9/09)


  1. What will determine the success or failure of the G20 agreement to revive the world economy?
  2. Identify any multiplier effects from the agreed measures.
  3. Why did the French and German governments object to any further fiscal stimulus packages?

The Mount Washington Hotel in Bretton Woods, New Hampshire was the location for a historically significant meeting in the summer of 1944. John Maynard Keynes was part of the British negotiating team at a meeting to plan the post World War II economic order. As a result of the meeting an adjustable peg system of semi-fixed exchange rates was developed and the International Bank for Reconstruction and Development (IBRD – now part of the World Bank Group) and the International Monetary Fund (IMF) were also born. As a result of this meeting the small rural location of Bretton Woods has moved into the economics lexicon. The institutions born out of this meeting have been subject to considerable criticism in recent years and in the first article linked to below, George Monbiot argues that it is unfair to attach this criticism to Lord Keynes. With a recent meeting of the G20 having been dubbed as Bretton Woods II, the original meeting and its outcomes have been thrown back into the limelight.

Keynes is innocent: the toxic spawn of Bretton Woods was no plan of his Guardian (18/11/08)
How Bretton Woods reshaped the world Guardian (14/11/08)
Shaping the world: Bretton Woods 1944 Guardian (14/11/08)
It takes two Guardian (5/12/08)


  1. Write a short paragraph summarising the outcomes of the Bretton Woods conference in 1944.
  2. Explain the role in the world financial system of (a) the World Bank and (b) the IMF.
  3. Assess the possible validity of the criticisms that have been levelled at the IMF. See particularly the George Monbiot article.
  4. Using diagrams as appropriate, explain how the system of semi-fixed exchange rates negotiated at Bretton Woods worked to maintain economic stability.
  5. Examine the principal reasons for the breakdown of the Bretton Woods system.

The G20 Leaders Summit on Financial Markets and the World Economy took place on November 14–15, 2008, in Washington DC. Many commentators dubbed this meeting ‘Bretton Woods II’. Bretton Woods – Mark I was a meeting in the summer of 1944 that set out the foundations for the post World War II economic order. It set up a system of semi-fixed exchange rates and led to the establishment of the International Bank for Reconstruction and Development (IBRD) and the International Monetary Fund (IMF). Bretton Woods Mark II was perhaps less historically significant, but the world leaders agreed a plan to boost the world economy through tax cuts, higher public expenditure and lower interest rates; something Lord Keynes, the principal negotiator for the UK at Bretton Woods Mark I, would have wholeheartedly approved of!

G20 to back global tax cuts Times Online (16/11/08)
This week, our leaders have a chance to make the world anew Guardian (9/11/08)
A dangerous free-for-all Guardian (11/11/08)
Bretton Woods II – five key points on the road to a new global financial deal Guardian (14/11/08)
G20 summit: ‘The world economy is broken and they need to reflate’ Guardian (14/11/08) Podcast
Doubts raised over prospects of success for ‘hasty summit’ Guardian (15/11/08)
Our chance for a working regulatory regime Guardian (15/11/08)


  1. Write a short paragraph summarising the outcomes of Bretton Woods II.
  2. Assess the extent to which the fiscal and monetary stimulus agreed by the G20 leaders will be successful at minimising the depth of the global recession.
  3. Discuss the need for regulatory reform of the world financial system (as considered at Bretton Woods II).
  4. The G20 “signalled a determination to press on with the completion of the Doha world trade round”. Assess the extent towhich this is likely to be successful.