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A stronger Europe and a stable China eases the economic uncertainty

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World Cement,

In the early aftermath of Brexit, the International Monetary Fund (IMF) published their new World Economic Outlook (WEO), where they revised their previous growth forecast published in April. The global growth outlook for 2016 and 2017 has been reduced and according to the IMF, the deterioration reflects the uncertainty of Brexit’s economic consequences.

In general, growth expectations for global GDP have come down by 0.1 percentage point for both 2016 and 2017. The drivers for this decline are the advanced economies, mainly the US and Japan. The advanced economies as a whole have been downgraded by 0.1 percentage point for 2016 and 0.2% for 2017 – and are now levelling at a 1.8 % growth rate for both years. This might be the result of a normalised monetary policy in the US and an extraordinary monetary policy in Japan not being effective. The revised numbers don’t bode well for shipping in general and the container business in particular. Continued demand growth from consumers and industries in the advanced economies is a critical demand component for the container shipping industry.

The IMF does not expect the combined growth for the emerging markets and developing economies to be affected. Their projection remains at the same levels as in the April WEO – a growth of 4.1 % in 2016 and 4.6 % in 2017. As the emerging markets rely on commodities as their main trade, this will not add to the headache for the currently depressed dry bulk shipping industry.

Finally, one can conclude that a one-sided focus on monetary expansion handled by central banks is not enough anymore. One needs supportive and concrete fiscal policy initiatives to be taken. This is more important than simply maintaining a zero interest rate.

Adapted from press release by Joseph Green

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