For the readers of this column who are invested in the red-hot grain industry, let’s go up to 100,000 ft. and explore an overview of the global economic forecast. The International Monetary Fund (IMF) recently came out with some predictions.
U.S. economic growth is predicted to be 0.5% in 2008, down from 2.2% in 2007. Depending upon converging negative events such as oil prices, unemployment and consumer spending, do not be surprised if this prediction is on the high side.
For my readers in Canada, your growth is expected to be cut in half from 2.7% to 1.3%. Canada’s biggest trading partner is the U.S., and when the U.S. catches the economic flu, expect an economic headache in Canada six to 12 months later.
The Euro zone is expected to grow by 1.6% in 2008, down from 3.1%, which is following the lead of the North American economy.
Extensive growth is expected to continue in Russia, India and China. These economies’ average growth was approximately 10% in 2007. This will slow to 6.8% in Russia, 7.9% in India and 9.3% in China. Many economists feel this region is decoupled from the U.S. and Euro zone economically. However, with over half of the world’s economy generated in the U.S. and Euro zone, and these regions expecting possible low or negative growth in 2008, it is bound to have implications on the emerging regions.
South of the equator, Brazil’s growth will decline from 5.4% to 4.8%. Again, much of the growth of southern hemisphere economies will come from the demand in the Asian region.
Trend Line 1970-2013
World real GDP growth has interesting perspectives. The forecast by the IMF is for 3 to 5% world growth in 2008. In the deep 1980-1982 recession, economic growth declined to under 1%. Contrast that to the 1973-1974 recession at 1.6% and the 1990-1991 recession rate of 1.4%. Only time will tell how the current downturn will play out!
Editor’s note: Dave Kohl, The Corn And Soybean Digest Trends Editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at [email protected]