Trade outlook in context

The IMF is spouting a stream of press releases (that it calls "World Economic Outlook" revisions) to show…well I'm not sure what. That it's relevant again, I suppose, and ready to take charge. But it's wise to treat their projections with the same care you would any others: a warning sign for me was noticing that some of their revised analysis is based on annualized 3-month percent changes in output and trade. Bound to be volatile. So it's a good idea to put these projections in context, as I attempt to do in this chart.

"World growth is projected to fall to just ½ percent in 2009, its lowest rate in 60 years, the IMF said in an Update to its World Economic Outlook, released on January 28... Global output and trade fell sharply in the final months of 2008. The continuation of the financial crisis, with government policies failing to dispel uncertainty, has caused asset values to fall sharply across advanced and emerging economies, decreasing household wealth, and thereby putting downward pressure on consumer demand." extract from IMF Survey

True enough, the projected downturn in trade in 2009 is sharper than anything most of us have ever seen. But the context is interesting, too. There's been an almighty rise ahead of that projected 'kink' in the curve (click the thumbnail to see a full-sized chart). That means—as we all remember—there has been a huge production boom over the past couple of decades, especially in developing countries and, despite the recent deflation marked by astronomical losses by households (a lot of them on paper), the world is still richer to day and incomes are better distributed than at any time in human history.

This is not the 1930s. The base from which trade and production can recover is not only much larger, and deeper it is more diverse (sectorally) and more widespread (geographically).

Tags for this entry: trade policy macroeconomics recession imf growth