IMF presents a brighter side to world economy at Diggers Dealers

first_imgWriting in HighGrade, John Feary says “The message may have been somewhat lost in the dry, academic delivery, but former International Monetary Fund chief Rodrigo de Rato had some positive tidings for the international mining sector at the annual Diggers and Dealers Forum in Australia. As keynote speaker at the opening of the three-day conference in Kalgoorlie, de Rato told the 2400 delegates that Europe’s economic woes can be overcome without destroying the world economy, and that China is still buying commodities. In fact, de Rato said, despite the mixed macroeconomic data and financial tensions in Europe, global demand for commodities in general remains very positive.“Demand growth rates average 6% for the period 2012-14, with the most significant being aluminum (6.7% in 2012 to 8.1% in 2014) and iron ore (4.1-11.3%). The driving force for most commodities would be China and the emerging countries.“China alone represents around 40% of total copper and stainless steel demand, 44% for zinc, 45% for aluminum and 47% for nickel. Iron ore, as the Australian mining sector knows so well, is also highly leveraged to Chinese growth.“However, de Rato predicts a subdued demand outlook for metallurgical coal since it is very exposed to mature economies, mainly Europe and Japan – which account for 44% of total seaborne imports.“Although China’s annualised growth rate has been decelerating for six consecutive quarters, the slowdown has been milder than in 2007-09 and low inflation gives room for monetary accommodation. Most forecasts put China in the 8-9% growth range for the next 24 months, and if the green shoots of recovery do appear in China, the single most important driver for mined commodities, a mild recovery in prices is likely.“De Rato said market uncertainty about the Chinese economy contrasts with the reality. Chinese copper imports in May this year were 65%  higher than in the corresponding month of 2011, up from 43% year-on-year growth the previous month. Iron ore imports rose by 20% in the same period.“One of the surprises of the global downturn has been the relatively strong performance of the emerging economies of the world. Low levels of inflation, public deficits below 2% on average and public debt below 30%, the emerging economies had been performing well since 2007-08.“Particularly significant has been dynamism in Asia beyond China, where growth has dropped from the pre-crisis levels of 8% but only to a range of 5.7-6.3%, contrasting with the 1.4% figure of the developed markets.“In Latin America also, thanks to the structural reforms and healthy macroeconomic policies of recent years as well as the equilibrium in their public accounts, the impacts of the crisis have been less harmful than in previous occurrences.“De Rato said the Euro area remains the greatest source of uncertainty in the world economy. It is the biggest economy in the world and its second most important currency, so its weakness has clear destabilising effects for the world economy. While the performance of the Euro nations in the last few years was a cause for pessimism, de Rato – a former Spanish economic minister – said their incredible achievement in creating the world’s biggest economy is a more positive sign. Once the challenges have been identified, he suggested the political will was there to overcome them, although it may take time.”last_img