Doomwatch: January 25th 2018

Well, it serves me right!  Having turned down my annual non-invitation to Davos18 in favour of succumbing to a virus acquired on the flight back from Rome I have revived to find everyone has suddenly become bullish. If references to ‘melt up’ keep multiplying I may have to consider changing the top headline to Euphoriawatch

Chart 1 IMF economists are as optimistic as usual

Source: Daniel Stewart

GDP Growth %

Estimate Estimate Projection Projection
2016 2017 2018 2019 In line with market sentiment?


3.2 3.7 3.9 3.9 At top of range

Advanced Economies

1.7 2.3 2.3 2.2


Developing Economies 4.4 4.7 4.9 5.0







Somewhat lower

Euro Area

1.8 2.4 2.2 2.0

Considerably lower


6.7 6.8 6.6 6.4

Who knows?


0.9 1.8 1.2 0.9

Somewhat lower


1.9 2.5 2.3 2.0

Considerably lower


1.2 1.8 1.9 1.9

Considerably lower


1.9 1.7 1.5 1.5

About right but GDP projection looks a bit low


0.9 1.6 1.4 1.1

Somewhat lower


–3.5 1.1 1.9 2.1

Considerably lower


7.1 6.7 7.4 7.8

About right

ASEAN 5 4.9 5.3 5.3 5.3

About right

The IMF top brass do get invited to Davos as it is their sort of thing and they even time publication of the first Economic Outlook of each year to coincide with it. Figure 1 is an abstract from the summary table and clearly shows the IMF economics team are not worrying much about a stock market crash and global economic slump.  Indeed, the whole report carried the banner ‘Brighter Prospects, Optimistic Markets, Challenges Ahead’. Despite their undoubted depth of knowledge, the IMF team is not really much better at forecasting than most other economists, not least because of political pressures from various governments (perhaps tactfully described as ‘authoritarian’).  Nevertheless, it would be presumptuous to challenge these projections and instead I have commented on how aligned the forecasts seem to be with market sentiment. The most obvious disparities are over the market’s implied semi-euphoric expectations for the Euro Area and wholly-euphoric expectations for Brazil. In contrast, there appears to scope for sentiment to improve over the UK, India and the ASEAN 5 (Indonesia, Malaysia, Philippines, Thailand, Vietnam).

Written by: Alastair Winter