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Good News for Global Economy

The recent announcement from the International Monetary Fund (IMF) that the global economy is on the road to recovery is very welcome news. The IMF has upped its GDP growth predictions for this year and next year, a positive sign for overseas property investment.

The IMF's latest World Economic Outlook (WEO), published twice yearly in April and October, claims that the world economic situation is finally improving after the steepest drop in trade and economy since World War II. The WEO predicts a global contraction of -1.1% for this year with positive growth of 3.1% for next year.

However, although this forecast is relatively high, not all the world's countries will be contributing equally. In fact, the bulk of the 12-month improvement of 4.2% is expected to come from emerging and developing countries, mainly the so-called BIC nations (Brazil, India and China).

According to the IMF, "emerging and developing economies are further ahead on the road to recovery". In its analysis of Latin America, the WEO says that "Brazil is leading the recovery in the region", an affirmation backed up by positive Q2 growth from Brazil (1.9%). Increased industrial output and consumer spending means that the BIC nations are expected to lead the world out of recession and into another era of economic growth.

The outlook isn't so rosy for developed countries. The WEO predicts Western European countries, North America and Japan to manage just 1.3% GDP growth in 2010 and that is between them. The euro zone is forecast to achieve a meagre 0.3%. The contrast with the 5.1% growth expected from emerging and developing economies could hardly be more striking.

Nevertheless, all the predictions are considerably better than those made by the IMF in July when global growth was expected to reach only 0.6% with few developed countries making over 0.9%. Recent improvements in the global economy would seem to show that we are gradually leaving the recession behind.
The WEO is, however, cautious and claims that its latest figures "describe an intermediate path. There is a recovery, but it will be weak by historic standards". Again, this is a global prediction, hiding stronger realities in certain countries.

For those looking at overseas property investment, the WEO makes interesting reading. While it would seem that the worst is over, we are not out of the tunnel yet. Unless, of course, you are looking at Brazil real estate. Merrill Lynch has just become ‘even more bullish' on Brazil and predicted 5.3% GDP growth next year.

This more than healthy increase is based on the wealth of positive economic data in Brazil over the last few months. With the 2014 World Cup and 2016 Olympics looming on the horizon, many analysts expecting property in Brazil to increase substantially in price over the next five years. It is therefore highly likely that when it comes to economic recovery and property investment, Brazil will, as the WEO says, "lead the way".

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