IMF Growth Forecasts: Missing the Mark So Far [Chart]
Will next week’s report be on target after 5 years of downward revisions?
The Chart of the Week is a weekly Visual Capitalist feature on Fridays.
Projections on the global economic recovery have been overestimated by most policymakers and institutions for some time now. The International Monetary Fund (IMF) has been no exception to this fallacy.
Whether it is simple error, wishful thinking, or a complex system that is to blame, the economists at the IMF have now missed the mark for five years in a row on their global real GDP growth forecasts. After multiple revisions downward, their most recent January 2016 report finally estimated growth for this year to be a mediocre 3.4%.
Of course, no one expects economists to be anywhere near perfect. However, what is troubling in this instance is that all estimates have erred on the side of being overly optimistic. This makes it difficult for investors, businesses, and governments to ground their expectations and to manage their assets.
This upcoming week, the IMF will release their latest World Economic Outlook (WEO) report, summarizing key economic figures as well as their forecasted growth for 2016 and the years ahead.
Will they miss the mark again, or will their projections finally line up with economic realities?
In recent weeks, IMF head Christine Lagarde has hit the press circuit to possibly set expectations ahead of the new report’s release. In Frankfurt, she had this to say on April 5, potentially revealing some clues for us:
Overall, the global outlook has weakened further over the last six months — exacerbated by China’s relative slowdown, lower commodity prices, and the prospect of financial tightening for many countries. Emerging markets had largely driven the recovery and the expectation was that the advanced economies would pick up the ‘growth baton’ – That has not happened.
She went on to suggest that a strong U.S. dollar, high unemployment and shoddy balance sheets in Europe, and economic data from Japan have all reduced growth in key developed countries. Further, emerging markets such as China, Brazil, and Russia had all faced more challenges than expected, and that the Middle East’s growth got hammered by weak energy prices.
Meanwhile, Lagarde saw India, Indonesia, Malaysia, Philippines, Thailand, and Vietnam as bright spots.
Later in the speech, she pulled no punches on potential global risks, mentioning “high debt” as the first risk to making recovery progress:
For advanced economies, [risks] relate to longstanding crisis legacies — high debt, low inflation, low investment, low productivity, and, for some, high unemployment.
While Lagarde made it clear that there has been a “loss of momentum” and that the IMF is “on alert, not alarm”, this could be a clue that the reality is setting in for the IMF: a sustained, real recovery is not in the cards unless giant obstacles are overcome. We believe this could take a prolonged time to truly correct, or that it could eventually happen after a major reset to our financial and political systems.
Either way, for once it seems possible (though improbable), that the IMF may finally see things the same way.
The 10 Breakthrough Technologies That Will Define 2019
Which innovations will dominate headlines in 2019? According to Bill Gates, watch for these 10 breakthrough technologies to change the world.
The 10 Breakthrough Technologies That Will Define 2019
Gone are the days of turning stones into spears. With the advent of new technologies, we’ve learned to develop tools that not only make living faster and easier every day, but also improve the future of humanity as a whole.
Today’s Chart of the Week draws from the MIT Technology Review, which features Bill Gates’ predictions for the top 10 breakthrough inventions that will capture headlines in 2019.
Top 10 Breakthrough Technologies
1. Gut Probe in a Pill
These swallowable devices can detect and potentially prevent diseases that cause malnutrition and stunted growth in millions of children worldwide.
2. Custom Cancer Vaccines
Personalized cancer vaccines, targeting only the cancerous cells and leave healthy cells alone, could help ensure faster recovery times and pose fewer risks to patients.
3. Meat-free Burgers
Plant-based and lab-grown food products will ideally alleviate the environmental impact of the livestock industry.
4. Smooth-talking AI assistants
The AI assistants of the future will have even more human-like conversations to personally engage customers. Companies would see measurable benefits, with just one breakthrough here garnering a 5% jump in productivity.
5. Sanitation without sewers
Improperly drained sewage causes death in one out of every nine children. Sanitation that doesn’t require sewers would not only prevent exposure diseases but also help turn waste into useful products like fertilizer.
6. ECG on your wrist
While most medical ECGS have up to 12 nodes to detect abnormalities, today’s wearables typically have only one. An ECG on the wrist would help reduce the risk of heart disease by monitoring changes and patterns in daily life.
7. Robot Dexterity
Advancements in robotics will enable the natural dexterity required to complete a greater range of tasks, such as helping an ailing loved one out of bed, doing the laundry, or building toys.
8. Predicting Preemies
Premature births are the leading cause of death for children under five years old. Tests to detect the possibility of a premature birth could be available in doctors’ offices in as little as five years.
9. Carbon Dioxide Catcher
Carbon dioxide catchers filter out CO₂ from the air and capture it for other uses. These include synthetic fuel creation, CO₂ for soft drinks, and plant growth in greenhouses.
10. New-wave Nuclear Power
Traditional nuclear reactors produce ~1,000 megawatts (MW), while these proposed mini-reactors would produce tens of megawatts ─ making them safer, more stable, and more financially viable for potential users.
A Vision for a Better Future
The biggest takeaway?
Seven of the 10 breakthrough technologies stem from the healthtech sector.
While several inventions on this list are years away from becoming a reality, they continue to embody the vision and passion that humans share to create and explore.
How the Modern Consumer is Different
We all have a stereotypical image of the average consumer – but is it an accurate one? Meet the modern consumer, and what it means for business.
How the Modern Consumer is Different
There is a prevailing wisdom that says the stereotypical American consumer can be defined by certain characteristics.
Based on what popular culture tells us, as well as years of experiences and data, we all have an idea of what the average consumer might look for in a house, car, restaurant, or shopping center.
But as circumstances change, so do consumer tastes – and according to a recent report by Deloitte, the modern consumer is becoming increasingly distinct from those of years past. For us to truly understand how these changes will affect the marketplace and our investments, we need to rethink and update our image of the modern consumer.
A Changing Consumer Base
In their analysis, Deloitte leans heavily on big picture demographic and economic factors to help in summarizing the three major ways in which consumers are changing.
Here are three ways the new consumer is different than in years past:
1. Increasingly Diverse
In terms of ethnicity, the Baby Boomers are 75% white, while the Millennial generation is 56% white. This diversity also transfers to other areas as well, such as sexual and gender identities.
Not surprisingly, future generations are expected to be even more heterogeneous – Gen Z, for example, identifies as being 49% non-white.
2. Under Greater Financial Pressure
Today’s consumers are more educated than ever before, but it’s come at a stiff price. In fact, the cost of education has increased by 65% between 2007 and 2017, and this has translated to a record-setting $1.5 trillion in student loans on the books.
Other costs have mounted as well, leaving the bottom 80% of consumers with effectively no increase in discretionary income over the last decade. To make matters worse, if you single out just the bottom 40% of earners, they actually have less discretionary income to spend than they did back in 2007.
3. Delaying Key Life Milestones
Getting married, having children, and buying a house all have one major thing in common: they can be expensive.
The average person under 35 years old has a 34% lower net worth than they would have had in the 1990s, making it harder to tackle typical adult milestones. In fact, the average couple today is marrying eight years later than they did in 1965, while the U.S. birthrate is at its lowest point in three decades. Meanwhile, homeownership for those aged 24-32 has dropped by 9% since 2005.
A New Landscape for Business?
The modern consumer base is more diverse, but also must deal with increased financial pressures and a delayed start in achieving traditional milestones of adulthood. These demographic and economic factors ultimately have a ripple effect down to businesses and investors.
How do these big picture changes impact your business or investments?
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