IMF Reports on the Worldwide Economy

On January 25, 2011, the International Monetary Fund released its World Economic Outlook Update. This document provides an interesting insight into the global financial recovery which Distinguished Advisors may wish to share with their clients in making investment decisions this RRSP season.  Describing progress as a "two-speed recoveryî, the IMF explains that growth is slow in the developed world because of high unemployment, and concerns in Europe. In emerging markets and developing countries growth is robust to the point of overheating in some areas, and inflation is a concern. Although the global recovery is expected to continue, the instability of the U.S. housing market and rising commodity prices pose some downside risk. Going forward, governments and households in advanced economies have to reduce debt and balance budgets while keeping reform of financial systems front and center.

 

The IMF growth forecast has been marked down for Canada in this report.  Two factors flagged in the negative are  high household debt levels, and on the external environment, risks particular to the U.S. economy.  The risk specific to our neighbor to the south were summarized as follows:

 

"The absence of a credible, medium-term fiscal strategy would eventually drive up U.S. interest rates, which could prove disruptive for global financial markets and for the world economy.  It is thus even more critical that policies be put in place to bring debt down over the medium term.  Such measures could include entitlement reforms, caps on discretionary spending, reforms of the tax system to boost fiscal revenue, and the establishment or strengthening of fiscal institutions."

 

ADDITIONAL EDUCATIONAL RESOURCE:  Distinguished Advisor Conference 2011.  The theme is Recovery.  Lowest tuition fees achieved with registration by February 15, 2011.