The ten biggest threats to the global economy

Is the IMF right to think there is only a 1pc chance of a global recession over the next year?

In its latest World Economic Outlook, the International Monetary Fund (IMF) puts the chances of growth in global output falling below the recession threshold of 2pc next year at just one in a hundred. Is this too sanguine a view? 

Global recessions are quite rare events, so if you had to put money on it, you’d go with the IMF. Even when one part of the world is in recession, it is more than likely that others will be growing quite strongly, leading to aggregate growth overall. 

1. Geo-political risk is at its highest since the Iraqi war, and many would argue, much more dangerous, with Russia apparently determined to re-establish its old Soviet borders whatever the economic costs and to relations with the West. 

2. Both the situation in Ukraine and the Middle East pose a severe threat to oil and gas production, 

3. A hard landing in China seems to me to be pretty much hard baked into the system already. 

4. Normalisation of monetary policy in the Anglo-Saxon economiescould prove highly disruptive to financial markets, grown drunk on years of ultra-easy money. 

5. The existential threat to Europe’s single currency has been removed, but it has left the Continent in a state of economic torpor. 

6. The idea of “secular stagnation”, touted by a number of fashionable American economists. 

7. This loss of potential growth may have something to do with the size of the debt overhang. 

8. Grown complacent on easy money, financial markets are once again badly underpricing risk, with spreads compressed and volatility at exceptionally low levels. 

9. Few of the lessons of the crisis seem to have been learned. House price bubbles, a major contributing cause of the crisis, have re-emerged in a number of advanced and developing market economies. 

10. Ageing populations are reinforcing the loss of economic potential, which in turn will leave many countries struggling to maintain their pension and healthcare promises.

Is the IMF right to think there is only a 1pc chance of a global recession over the next year? I'd say that's wishful thinking.

DYI