IMF Results Are In

[The Librarian]

The International Monetary Fund (IMF), a body of 189 countries working to keep the global economy in check, released its annual report, the World Economic Outlook. 

The diagnosis? All vital signs look good. The IMF predicts the world economy will grow 3.6% by the end of 2017 and 3.7% the following year (compared to 3.2% in 2016).

For you macro nerds out there, that would be the fastest growth this decade and brings us back to the 30-year global average.

So nothing to worry about, right?

Uhhh, maybe. What’s a yearly checkup without the doc taking your blood pressure? Confidence in the global economy and low borrowing costs saw the G20 nations pile up $135 trillion in debt (or 235% of collective GDP). Before the financial crisis, that ratio peaked at 210%. 

As for who’s to blame for the credit craze, you can thank the usual suspects, the U.S. and China, for contributing two-thirds of the $80 trillion increase since 2006. 

But there are more warning signs. 

When the IMF checked in with the 30 most influential global banks (together, holding $47 trillion in assets), it found a few warts. Nine of the banks, including Barclays, Citigroup, and Deutsche Bank, might check their pockets only to find them empty during the next financial downturn. That’s because they aren’t hitting the IMF’s cutoff of an 8% return on equity (ROE) to remain sustainable.

What does this mean for you?

No, the IMF isn’t recommending you stash your savings in your mattress and order the Bear Grylls Survival Kit from www.doomsdayprep.com.

The good times should keep rolling providing no global market shocks, which could include: the termination of Nafta (more on this later), geopolitical crises, and an increase in protectionist policies…looking at you, Brexit. And if emerging markets (like China, India, and Brazil) can trim excessive borrowing, you can keep that survival kit in the box.

https://www.morningbrew.com/stories/good-bad-imf/