Global Growth Trending Downward

July 20, 2012 | Christopher Caparelli, CFA, Partner

On Monday, the IMF lowered its 2012 forecast for global growth to 3.5% down from an estimate of 3.6% made earlier this year. The growth forecast for 2013 was also lowered to 3.9% from 4.1% as growth around the world continues to stagnate. Emerging economies – a primary driver of future growth – have seen growth rates drop from 7.5% in 2010 to a projected 5.6% in 2012. The most notable member of the emerging economies, China, has begun to pursue expansionary monetary policy in hopes of reversing its slowing economic growth. Another significant headwind for global growth is the European Union, which is expected to be flat in 2012, as Spain, its third largest contributor, continues to be mired in a national debt crisis. In the U.S., growth is expected to remain well below trend as the economic recovery, now in its fourth year, struggles to gain momentum. Collectively, the struggles of these countries will make it difficult to achieve global growth north of 4% over the next few years.