IMF Releases World Economic Outlook

April 22, 2010 International Tax CooperationTaxation in EUTaxation in UKTaxation in USA

2007AM_005The International Monetary Fund (IMF) has released its regular World Economic Outlook (WEO) report, assessing developments for major economies and projections at a global level.

On April 21st the EMF released its latest WEO at a press briefing held by William Murray, IMF Chief of Media Relations. The report revealed that the IMF’s global economic growth forecast has been raised to 4.2 percent. The new figure reflects a 0.3 percent projection increase when compared to the IMF’s estimates released in January 2010. No changes were made to the economic projections for the 2011 year. The report continued to issue several key directives that were deemed important for continued positive growth.

Two key suggestion brought forward in the WEO are for Governments to take actions to reduce sovereign risk, and to take steps towards unwinding stimulus packages introduced throughout 2009 and 2008. These suggestions are intertwined and based on the need to reduce national debt-to-GDP ratios, while maintaining growth and avoiding excessive inflation, along with raising Government tax revenues. The WEO advised that efforts be made in all economies to broaden national tax bases, with measures including increased consumption taxes and fuel taxes accompanied by decreased personal and capital tax burdens. Further, upon reaching a sustainable level of economic growth, Governments worldwide are advised to focus on future financial policy to create safeguards against economic downturns. Particular attention was given to the need of protection for “too-important-to-fail” institutions without having them rely on Government fiscal guarantees, such as the proposed bank tax “stability funds”.

During the press release Olivier Blanchard, IMF Research Department Director, summarized the sentiment of the report, saying: “A global depression has been averted. The world economy is recovering, and recovering better than we had previously thought likely.” But despite the positive attitude, a warning was also issued that the growth of nations is expected to occur at widely dissimilar rates. Some nations’ growth estimates for 2010 were downgraded in the report, and an even larger number of nations were downgraded in the next year. For 2011, the growth rate for the entire Euro Area is estimated to fall by an aggregate 0.1 percent. For 2010 Italy’s and Germany’s growth expectation has been decreased by 0.2 percent and 0.3 percent respectively. India and China are slated to show the greatest growth in 2010, at 8.8 percent and 10.0 percent respectively. Amongst the advanced economies, the US and Canada are projected to show the highest growths of 3.1 percent.

Photo by International Monetary Fund