Global ETFs: IMF Reduces Outlook On World Growth

September 21st at 4:30pm by Tom Lydon

Could country-specific exchange traded funds (ETFs) see a slow down along with the economies they track, as the International Monetary Fund cut its projections on global growth?

According to the IMF, the world economy will grow 4% this year and the next, down from its previous 4.3% project for 2011 and 4.5% for 2012, reports Sandrine Rastello for Bloomberg.

“Global activity has weakened and become more uneven, confidence has fallen sharply recently, and downside risks are growing,” according to the IMF’s World Economic Outlook report. In Europe, “leaders must stand by their commitments to do whatever it takes to preserve trust in national policies and the euro,” where as in the U.S., “deep political divisions leave the course of U.S. policy highly uncertain.”

The IMF estimates richer countries will expand 1.6% this year and 1.9% next year, down from its previous forecast of 2.2% and 2.6%, respectively. Growth in the U.S. was lowered to 1.5% from 2.5% its previous June estimates.  The Fund lowered its prediction for the European region to 1.6% this year and 1.1% next year. [Italy ETFs in Focus on S&P Ratings Downgrade]

  • Vanguard Europe Pacific ETF (NYSEArca: VEA)
  • iShares S&P Europe 350 Index Fund (NYSEArca: IEV)

Japan, on the other hand, was the only G-7 member to garner a higher forecast, with a 0.5% contraction compared to the previous forecast of a 0.7% drop. In 2012, the economy should expand 2.3%, compared to the June estimates of 1.7%. [Japan ETFs Not Spared from Eurozone Turmoil]

  • iShares MSCI Japan Index Fund (NYSEArca: EWJ)

The IMF also revised downward growth in the emerging markets to 6.4% this year and 6.1% next year, down from its previous estimates of 6.6% and 6.4%, respectively. The Fund based its estimates on the best possible outcome of an optimistic and stable global outlook. [China and the European Debt Crisis]

  • Vanguard Emerging Markets ETF (NYSEArca: VWO)
  • iShares MSCI Emerging Index Fund (NYSEArca: EEM)

“Key drivers of stronger activity over the near term include the rebound of activity in Japan, the drop in oil and food prices, and solid demand growth in key emerging market economies,” the IMF stated.

For more information on global economies, visit our global ETFs category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.