The International Monetary Fund has cut its forecast for global growth, amid continued concerns about Europe. Separately, the International Labour Organization warned this week of rising global unemployment, saying the world must create 600 million jobs over the next decade. Finally, Japan has announced its first annual trade deficit in more than 30 years, attributed to the earthquake and tsunami in March 2011.
IMF Cuts Forecast
The IMF now predicts 3.3 percent global growth in 2012, down from a September forecast of 4 percent. In an update to the World Economic Outlook report, the IMF also predicted that growth in 2013 will be 3.9 percent, down from the earlier 4.5 percent estimate.
The IMF cut its growth projection even for ASEAN countries. The Fund now expects the five major ASEAN economies, the Philippines, Indonesia, Malaysia, Thailand and Singapore, to post an average growth of 5.2 percent this year and 5.6 percent in 2013. Previously the IMF predicted a 5.6 and 5.8 percent growth for this year and 2013.
The report said the euro area may enter a “mild recession” in 2012 as it shrinks 0.5 percent. The United States outlook was unchanged at 1.8 percent growth.
“The epicentre of the danger is Europe but the rest of the world is increasingly affected,” said the IMF's chief economist Olivier Blanchard. “There’s an even greater danger, namely that the European crisis intensifies. In this case the world could be plunged into another recession.”
The IMF, which co-finances loans to Greece, Ireland and Portugal, has identified a potential global financing need of US$1 trillion in coming years and is seeking US$500 billion in new lending resources from its member countries to address potential loan demand.
Report: IMF Says Europe Crisis Threatens to Derail Global Economy [Bloomberg, 24 Jan 2012]
Meanwhile, the International Labour Organization has sounded the alarm on the global jobs situation in its annual report. Even if the crisis in Europe is ended quickly, the ILO expects global unemployment to be stuck at about 6 percent until at least 2016.
"We had expected a gradual stagnation or coming down of unemployment numbers," said Ekkehard Ernst, one of the report's authors. "That's not something we foresee this year any more. Even in our baseline the unemployment numbers are increasing. With a possibility of a serious deterioration of global growth these numbers actually increase very much."
The ILO says there are nearly 200 million unemployed and that another 40 million jobs need to be created each year for the next decade. Thus the world needs to create a total 600 million productive jobs over the next decade.
Even if this figure is met, it would still leave 900 million workers and their families below the US$2 a day poverty line.
The ILO has called for more coordination of fiscal policies, repair and regulation of the financial sector and support for the real economy.
Report: World needs 600 million new jobs in next decade: ILO [Reuters, 23 Jan 2012]
Japan Trade Deficit
Finally, Japan has announced its first annual trade deficit in more than 30 years. The deficit came in at 2.49 trillion yen (US$32 billion). Japan's imports rose 12% and its exports fell 2.7%, compared to the previous year.
The decline in exports was due to the earthquake and tsunami on 11 March 2011. Factories were damaged and supply chains disrupted for major exporters including Toyota Motor and Sony.
Japanese firms with factories in Thailand also suffered further disruptions to production due to last year's flooding. Japanese exports were also hit by the rising yen, which makes Japanese products more expensive overseas.
On the other side of the trade balance, Japan had to increase its imports of crude oil, natural gas and other petrochemicals after the Fukushima nuclear disaster, as many nuclear power stations were taken offline.
Report: Japan posts first annual trade deficit in 30 years [BBC, 25 Jan 2012]