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Global Economic Forecasts Shaping Modern Financial Markets

This resource explores the impact of IMF and World Bank economic forecasts on financial markets.


Global economic forecasts aim to make predictions by analyzing the current state and future trajectory of the world economy. Organizations that create these forecasts make projections about the future state of the global economy. These predictions affect financial markets and make price fluctuations inevitable. The International Monetary Fund (IMF), the Organization for Economic Co-operation and Development (OECD), and the World Bank are leading international organizations that provide predictions and analyses of the global economy. These organizations prepare global economic forecasts using various methods and data. These forecasts cover a range of economic variables such as economic growth rates, inflation, unemployment, trade balance, and other macroeconomic indicators.

International Monetary Fund (IMF)

The IMF uses advanced economic models to create its forecasts and regularly collects economic data from member countries. This data is obtained from central banks, national statistical agencies, and other official sources. Additionally, the views of economic experts and analysts are also consulted. The IMF publishes the "World Economic Outlook" (WEO) report annually. This report includes the global economic situation and future projections. Detailed country-specific analyses and forecasts are also part of the report.

The International Monetary Fund (IMF) monitors the economic policies of countries, makes economic growth forecasts, and provides financial assistance to address economic crises to ensure global economic stability. The reports, forecasts, and policies published by the IMF can have a major impacts on financial markets. Now, let's examine the effects of the IMF's forecasts on financial markets with some examples.

The IMF's growth or contraction forecasts can affect stock prices on a sectoral basis. The IMF raised its global economic growth forecast for 2024 to 3.2%. In the report published on May 28, 2024, it projected that the Chinese economy would grow by 5% in 2024. This positive growth forecast increased confidence in the stock markets, anticipating an acceleration in global economic recovery, and led to a rise in stock prices. Shares, especially in the technology and industrial sectors, gained value. You can see an example of this in the BYD Company LTD. stock chart below:

BYD Company LTD. stock performance after IMF report.
IMF growth forecast impact on BYD Company LTD.

In 2018, the IMF's negative forecasts and crisis warnings about the Argentine economy led to a rapid depreciation of the Argentine Peso. The Peso/Dollar exchange rate experienced serious declines following the IMF's reports. The chart below shows the exchange rate between the Argentine Peso and the US Dollar:

Major Peso/Dollar drops post-IMF reports.
IMF crisis warnings lead to rapid Peso depreciation.

World Bank

The World Bank is an international financial institution that operates with the mission of reducing global poverty and supporting sustainable development. This organization provides projects and financial support for developing countries with the aim of reducing poverty and supporting economic development. It focuses particularly on providing development aid and loans to low and middle-income countries. By offering financing, technical assistance, and policy advice to developing countries, it promotes economic growth. Moreover, it publishes reports on global poverty and inequality trends and supports countries' development strategies. The World Bank's forecasts can impact financial markets both positively and negatively.

Positive economic growth forecasts from the World Bank can increase foreign investments. For example, the publication of positive data about Turkey in the World Bank's financial report, such as:

 - "Following the May 2023 elections, the newly appointed economic team launched a comprehensive policy set addressing past macroeconomic imbalances, notably high inflation. Since then, Turkey has been progressing in normalizing its macroeconomic strategies. The country experienced strong economic growth of 4.5% in 2023."

Such positive data led to price fluctuations on the Borsa Istanbul, resulting in a short-term increase. See the BIST 100 Index chart below:

Graph showing BIST 100 Index increase post-report.
BIST 100 Index rises with World Bank's positive forecast.

The World Bank predicted that the war in Ukraine would cause a 1.7% contraction in the global economy in 2023. This forecast clearly highlighted the economic impact of the war, changing investors' risk perception. As a result, there was a decrease in stock prices and an increase in interest rates. Furthermore, the World Bank forecasted a 23% increase in global food prices in 2023. This forecast reflected the effects of the war in Ukraine on food supply, increasing investors' interest in food stocks and leading to a rise in food commodity prices. You can see this situation in the Wheat price chart below:

Graph showing wheat price increase.
Impact of Ukraine War on Wheat prices.

The infrastructure projects, education, and healthcare investments financed by the World Bank promote economic growth in developing countries. Such projects can attract private sector investments, create employment in local markets, and facilitate long-term economic development. The provision of financing by the World Bank to a country or project can be seen as a sign of credibility for international investors. This support can help improve credit ratings and increase foreign investments. Also, the World Bank encourages economic and institutional reforms in countries where it provides financing. These reforms contribute to long-term economic stability and growth. They enhance the investment climate, boost private sector investments, and support the development of financial markets.

Note: Keeping in mind that World Bank forecasts can have a major impact on financial markets, it's also important to remember that these forecasts are just predictions and may not always turn out to be accurate. When trading in global financial markets such as forex and stocks, it's more sensible to conduct technical and fundamental analysis beforehand.

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