Posted by Marcelo Perez

On July 8th, the International Monetary Fund released updated projections for economic growth worldwide. Here’s what they had to say in their July Edition of the World Economic Outlook:

The global economy is beginning to pull out of a recession unprecedented in the post–World War II era, but stabilization is uneven and the recovery is expected to be sluggish. Economic growth during 2009–10 is now projected to be about ½ percentage points higher than projected in the April 2009 World Economic Outlook, reaching 2.5 percent in 2010. Financial conditions have improved more than expected, owing mainly to public intervention, and recent data suggest that the rate of decline in economic activity is moderating, although to varying degrees among regions. Despite these positive signs, the global recession is not over, and the recovery is still expected to be slow, as financial systems remain impaired, support from public policies will gradually diminish, and households in countries that suffered asset price busts will rebuild savings.

Global activity is forecast to contract by 1.4% in 2009 and to expand by 2.5% in 2010, which is 0.6% higher than in April’s forecast. The higher annual average growth rate for 2010 largely reflects carryover from a markup in growth during the final half of 2009, according to the IMF.

The IMF is constantly reiterating that the recovery is largely due to government involvement in the markets. They believe that slashing interest rates to record lows and spending billions in stimulus and bailouts is the solution to the problem, not the cause. Well, we think otherwise.