IMF warns on recession risk as Political, Social worries rise

Economic growth


Triangle large.pngWhen the economy is running well, most people tend to get on with their lives. That was the case during the 1982-2007 SuperCycle, when growth was almost constant. But today’s greater economic uncertainties translate into a growing role for Political and Social factors, as the triangle above describes:

• In the West, politics is becoming much more important. What will happen over the ‘fiscal cliff’ in the US, or the Eurozone? Nobody knows, but the decisions will not be made on solely economic factors
• The Middle East has some of the youngest populations in the world. This social factor is a key driver for the Arab Spring, as young people go on the streets to demand jobs
• In China, economics has never been the main factor. The Communist Party has instead carefully balanced social and political factors since Deng’s 1992 Southern tour, and the new leadership will continue this policy

This makes forecasting a lot more difficult. No longer can companies simply decide that polyethylene demand, for example, will be 1x or 1.2x GDP, and then simply use a GDP forecast from the IMF to finalise a forecast. As fellow-blogger John Richardson notes, the removal of economics as the key driver is the equivalent of removing the suspension from a car.

Not only will the journey become much more bumpy, but the end-result will be much more uncertain. As the IMF themselves now warn:

“There is a 1 in 6 chance of global growth falling below 2%, which would be consistent with a recession in advanced economies and low growth in emerging market and developing economies. Ultimately, however, the forecast rests on critical policy action in the euro area and the United States, and it is very difficult to estimate the probability that this action will occur.”

The chart shows benchmark price movements since the IeC Downturn Monitor’s 29 April 2011 launch, with latest ICIS pricing comments below:

HDPE USA export, purple, down 20%. “Producers were unwilling to lower prices to make material more competitive with global pricing”
PTA China, red, down 18%. “The spread between PTA spot prices and PX costs narrowed to below $60/tonne since early October, which is too low to cover variable costs of $120-150/tonne for most PTA producers”
Naphtha Europe, brown, down 15%. “Oversupply now building in the European naphtha market”
Brent crude oil, blue, down 13%
Benzene NWE, green, up 2%. “Tighter availability of feedstock pyrolysis gasoline (pygas).”
S&P 500 stock market index, pink, up 1%


UK housing markets approach their Minsky Moment


The UK housing market has led a charmed life in recent years. Unlike the US, Spa...

Learn more

Oil markets have lost their price discovery role


The US spent $6bn on its presidential and congressional elections this year. Apa...

Learn more
More posts
The state of the global economy in 2020

Last Wednesday, I gave the opening presentation for the ICIS PET Conference and looked at whether th...

Reality dawns for business as No Deal Brexit approaches

I warned before the June 2016 Brexit referendum that Brexit was all about politics, and Boris Johnso...

Global chemical industry – key trends for success in today’s New Normal

The chemical industry is the best leading indicator for the global economy. On Friday, I had the pri...

Oil prices signal potential end to the V-shaped recovery myth

Oil prices have moved into another ‘flag shape’ – which previously provided critic...

Bankruptcies now the key risk as hopes for V-shaped recovery disappear

Governments, financial markets and central banks all originally assumed the Covid-19 pandemic would ...

Merkel warns of need to prepare for No Deal Brexit

Most people missed the fact that last Tuesday was the last possible date to delay the UK’s exi...

World moves from Denial to Anger, as the Paradigm of Loss moves forward

I have been warning about the Covid-19 risk since early February, and in April suggested here that: ...

The New Normal for global industry

The global chemical industry is the third largest sector in the world behind agriculture and energy,...


Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more


Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more