- The IMF in its growth forecasts believes the impact of lower oil prices could be underestimated and it could boost growth more than forecast. As downside risks to growth they see the chance of lower investment, stagnation in Europe and Japan, geopolitical events and market volatility.
- That said the world growth forecasts are around 0.3% points lower than forecast in October, with more of the growth downgrade coming from the developing markets, with Russia and the oil exporting countries showing the biggest downgrades. The US was the only country to see growth expectations upgraded.
- For the Europe the situation with Russia remains unresolved. Some commentators believe Russia is steering towards a confrontation with what Russia believes to be an unprepared NATO. NATO spends around 5x more than Russia on defence but in Europe is at best able to field a fifth of the number of tanks and third the number of artillery, self-propelled guns and rocket launchers which means that for incremental, on-the-ground warfare NATO has no answer. On top of that, Russia has repeatedly made provocative demonstrations of strength in the last year (e.g. flights very close to or into European countries’ and NATO members’ airspace). Perhaps the most important driver of Russian foreign policy is that domestic policy is not garnering Mr. Putin much favour, the defence of Russian minorities outside Russia is gaining him public approval as Russia is again seen to be a superpower able to impose its will on the West. The divergent thoughts in NATO on the best course of action to stop Russia is unlikely to have concerned Putin. In the end we however believe that this conflict will not escalate. We believe that if it ends with the annexation of the Crimea, Russia will be content to leave it at that and enable their re-entry into the international community. …
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