TIMID GLOBAL GROWTH: THE NEW NORMAL?

Transcription

1 TIMID GLOBAL GROWTH: THE NEW NORMAL? 1 THE IMF FORECASTS GLOBAL GROWTH OF ~ 3.% IN 1/1, with a pickup in advanced economies and stabilization in emerging markets According to the IMF, global growth is projected to reach 3.% in 1. The overall growth of advanced economies masks differences between countries. While the US has rebounded and is now growing faster, economies like Japan and the EU will continue to struggle. On the emerging market side, growth is more subdued. China has slowed down, Russia s outlook has weakened, and most commodity exporters have been affected by declining prices Global GDP Growth over Time (In % of Y-o-Y Real GDP Growth, 198-) Emerging Markets and Developing Economies World Advanced Economies Source: World Economic Outlook, IMF, Apr. 1 Looking Ahead

2 ADVANCED ECONOMIES CONTRIBUTION TO GLOBAL GROWTH HAS REBOUNDED, but despite their slowdown, emerging markets still drive global expansion with Asia and Africa leading the way Advanced economies contribution to global growth remains subdued with the exception of the US. Emerging markets growth rates are undergoing a shift with China and the greater Asia Pacific region continuing to slow down. India s share is projected to grow by nearly % between 1 and 19; rates in China will slow by the same amount. Africa will become an important focal point of growth as the percentage of middle class consumers expands, with the potential to nearly double GDP to more than US$ 3.7 Trillion by 19 Country and Regional Contribution to Global Growth (1) (In Percentage Points of Total GDP Growth, 7-) Other Developing Economies China India US Other Advanced Economies EU World Regional Growth Across Time Periods (In Average % Growth of GDP at PPP per Time Period, -7, 8- and 1-19) Asia and Pacific Africa Middle East Western Hemisphere Europe Note: (1) Estimates based on data from 19 countries, weighted by GDP at purchasing power parity Source- Upper Chart: World Economic Outlook, IMF, Apr. 1 Source- Lower Chart: World Economic Outlook, IMF, Oct. 1 Looking Ahead

3 LOW OIL PRICES WILL POTENTIALLY HAVE A POSITIVE IMPACT ON GLOBAL GROWTH, shifting gains from oil exporters to consumers in oil importing economies Falling oil prices stand to have a major impact on the global economy, shifting resources away from major oil producers and boosting oilimporting economies with large consumer markets. Overall, lower oil prices will stimulate net global growth. While current projections have the price per barrel remaining at US$ -7 in 1, a drop to US$ - would increase global growth by nearly half a percentage point. The impact will vary by country, ranging from an almost % slowdown in real GDP growth in Saudi Arabia to a % increase in GDP in the Philippines World Real GDP Growth Under Different Oil Price Scenarios as per IHS (In % Y-o-Y of Real GDP Growth, 1) 3. Upper Range 3.. Baseline Estimate. Brent Oil Price Scenario US$ 8-9 US$ -7 US$ - Country Changes in GDP Growth in the Dramatic Scenario of a Drop of Oil Barrel Prices from US$8 to US$ (In % Y-o-Y Real GDP Growth Relative to Real GDP Growth at US$ 8/Barrel Rates, 1-1) Saudi Arabia Russia UAE Norway Malaysia Netherlands Denmark Poland Japan Indonesia Canada Germany South Korea Brazil UK India US Turkey China Thailand South Africa Slovak Republic Philippines Trade Balance of Crude Petroleum Oils (In US$ Billion, ) NA Circle color: Net Exporting Countries Net Importing Countries Source- Upper Chart: Global View Insights, IHS, 1 Sources- Lower Chart: Bloomberg (based on Oxford Economics); International Trade Centre Trademap Database, Looking Ahead 7

4 THE GLOBAL ECONOMY IS HEADING INTO A PERIOD OF LOW POTENTIAL GROWTH, with the risk of secular stagnation driven by ageing population and slowing innovation affecting standards of living Both developed and emerging markets face a decline in potential growth after the crisis. In developed economies, the slowdown stems largely from low capital growth and low potential employment as the population ages. As for emerging markets, low factor productivity is the major cause of low potential growth. The low growth has led many economists including those at the IMF to see a risk of secular stagnation. With secular stagnation, economies would grow more slowly, making it hard to raise standards of living Potential Growth of Advanced Economies by Source of Growth (In %, -) Potential Growth of Emerging Economies by Source of Growth (In %, -) Potential Output Growth Total Factor Productivity Growth Potential Employment Growth Capital Growth Real GDP Growth (In % of 1-Year Moving Average Growth, 197-) Germany Italy Japan UK US Source- Upper Chart: World Economic Output, IMF, Apr. 1 Sources- Lower Chart: Penn Table; World Bank Development Indicators 8 Looking Ahead

5 NORTH AMERICAN GROWTH WILL BE ROBUST, with the US growing at 3.1% in 1/1 and Canada benefiting from a rise in exports to a recovering US economy US growth is being driven by solid employment growth, a drop in unemployment, stronger nonresidential activity and continuing low inflation. The Canadian economy has benefited from growth in the US, its biggest export partner North America s (1) Economic Outlook: Overview of Major Regional Economies (In Current US$ Billion, 1 and In % Y-o-Y Real GDP Growth Rate, 1-1) Canada and Real GDP Growth (In US$ Billion and In % Y-o-Y, 9-).1 3,, 1, Canada US 3.1 US and Real GDP Growth (In US$ Billion and In % Y-o-Y, 9-) Billions 3,, 1, % - - Nominal () GDP (In Current US$ Billion, 1) Real GDP Growth 1,-,999 > 1, % Size = Y-o-Y Real GDP Growth (In %, 1-1) Sample Size=.% Notes: (1) Includes the United States and Canada and excludes Mexico () Projections of decreasing GDP, when applicable, are partially driven by lower oil prices and depreciating currencies against the US$ Source: World Economic Outlook, IMF. Apr. 1 Looking Ahead 9

6 LATIN AMERICA WILL CONTINUE TO EXHIBIT SLOW GROWTH, with lower external demand and weak domestic economic activity Many Latin American economies depend on exports of commodities and have been hit by the drop in commodity prices. In addition to the challenges in international trade, many countries face domestic constraints, including supply bottlenecks, tight labor markets, and uncertainty over policy direction Latin America and Caribbean s Economic Outlook: Overview of Major Regional Economies (In Current US$ Billion, 1 and In % Y-o-Y Real GDP Growth Rate, 1-1) Mexico 3.. Guatemala. El Salvador Mexico and Real GDP Growth (In US$ Billion and In % Y-o-Y, 9-), 1 1, 1, Argentina and Real GDP Growth (In US$ Billion and In % Y-o-Y, 9-) Honduras Costa Rica. Nicaragua.3 Bahamas.1 Panama 1.9 Ecuador.1 Dominican Republic 3. Colombia 3.8 Peru 3.3 Haiti.7 Chile Venezuela.3 Bolivia -.3 Argentina Trinidad & Tobago 3.8 Guyana. Paraguay Brazil Uruguay.7 Suriname Colombia and Real GDP Growth (In US$ Billion and In % Y-o-Y, 9-) 8, 1, Venezuela and Real GDP Growth (In US$ Billion and In % Y-o-Y, 9-) Brazil and Real GDP Growth (In US$ Billion and In % Y-o-Y, 9-) 3, Nominal (1) GDP (In Current US$ Billion, 1) < > % Real GDP Growth Size= Y-o-Y Real GDP Growth (In %, 1-1) Sample Size=.% Note: (1) Projections of decreasing GDP, when applicable, are partially driven by lower oil prices and depreciating currencies against the US$ Source: World Economic Outlook, IMF. Apr. 1 1 Looking Ahead

7 EUROPE S GROWTH IS UNEVEN IN BOTH ADVANCED AND EMERGING COUNTRIES, with its biggest bloc the Eurozone still growing slowly Europe s growth remains slow, although a recovery is anticipated given the European Central Bank s quantitative easing and the drop in the price of oil. However, some structural problems remain, including rigid labor markets, barriers to competition and slow innovation. Emerging Europe, like advanced Europe, has a varied outlook with countries like Poland, Hungary and Turkey growing quickly while others struggle Europe s Economic Outlook: Overview of Major Regional Economies (In Current US$ Billion, 1 and In % Y-o-Y Real GDP Growth Rate, 1-1) Sweden 3. Iceland 1..7 Finland Norway.8 Estonia Latvia.3 Ireland 3.9 UK Denmark 1. Netherlands 1. Poland Lithuania.8 3. Portugal.. Spain 1.3 Belgium Germany Slovakia..9 Czech Rep.. Romania Luxembourg.9 Austria.7.7 Switz. Slovenia Hungary France Bos.. Croatia & Herz Bulgaria. Serbia Italy Montenegro Macedonia Albania 3. Turkey 3.1. Greece Cyprus (In Current US$ Billion, 1) < >1 % Size=Y-o-Y Real GDP Growth (In %, 1-1) Sample Size= 3.% Source: World Economic Outlook, IMF. Apr. 1 Looking Ahead

8 RUSSIA S CONTRACTING ECONOMY WILL AFFECT PROSPECTS OF GROWTH WITHIN THE CIS, with most countries economies slowing down Russia s recession, the depreciation of the ruble, and the economic crisis in Ukraine will create problems for the whole region. Russia s projected negative growth for 1 reflects the impact of lower oil prices, economic sanctions and geopolitical tensions. Despite lower growth, many CIS economies still struggle with high inflation the region as a whole is expected to have 17% inflation in 1 reflecting passthroughs from depreciating currencies CIS (1) Economic Outlook: Overview of Major Regional Economies (In Current US$ Billion, 1 and In % Y-o-Y Real GDP Growth Rate, 1-1) -3.8 Russia -.3 Belarus. Ukraine -. Kazakhstan Moldova Georgia Uzbekistan Kyrgyzstan -1. Armenia. Turkmenistan Azerbaijan Tajikistan Mongolia. Ukraine and Real GDP Growth (In US$ Billion and In % Y-o-Y, 9-) Billions % Kazakhstan and Real GDP Growth (In US$ Billion and In % Y-o-Y, 9-) Mongolia and Real GDP Growth (In US$ Billion and In % Y-o-Y, 9-) Nominal () GDP (In Current US$ Billions, 1) Real GDP Growth , >, # Size= Y-o-Y Real GDP Growth, (In %, 1-1) Sample Size= 1.% Notes: (1) Mongolia, Georgia and Turkmenistan are not part of the Commonwealth of Independent States (CIS) but are added to CIS countries in IMF s regional analysis due to the similarity in their economies to CIS countries () Projections of decreasing GDP, when applicable, are partially driven by lower oil prices and depreciating currencies against the US$ Source: World Economic Outlook, IMF, Apr. 1 1 Looking Ahead

9 SLOWER GROWTH DOESN T MEAN NO GROWTH: ASIA PACIFIC WILL STILL BE ROBUST with South Asian economies faring particularly well Growth rebounded in parts of Asia towards the end of 1 and is likely to continue in 1/1. Faster growth in India is being driven by a rise in exports and investment. In China, the slowdown is a result of a reduction in credit in both the banking and nonbanking sectors. For most of Asia, growth is robust, although some vulnerabilities remain because of fiscal sustainability and current account deficits Asia Economic Outlook: Overview of Major Regional Economies (In Current US$ Billion, 1 and In % Y-o-Y Real GDP Growth Rate, 1-1) 3. Afghanistan China Korea Japan 1..3 Pakistan. Nepal 7. India. Sri Lanka (In Current US$ Billion, 1) Bangladesh Myanmar 3.7 Thailand 7.3 Laos 7. Cambodia. Vietnam.8 Malaysia 3. Singapore. Indonesia 3.8 Taiwan.8 Hong Kong -. Brunei.7 Philippines.8 Timor-Leste 19.3 Papua New Guinea < N/A 1,-,999,-, 3.3 Fiji % Size= Y-o-Y Real GDP Growth (In %, 1-1) Sample Size=3.% Australia.8.9 New Zealand Source: World Economic Outlook, IMF, Apr. 1 Looking Ahead

10 CHINA S GROWTH IS STABILIZING AS INDIA S PICKS UP, with growth in much of the rest of Asia ticking up Japan s growth remains low but will rebound after the short dip caused by the consumption tax. Australia and South Korea s growth will be helped by exports while ASEAN countries will enjoy robust growth resulting from high levels of investment and internal reforms. Thailand s political uncertainty remains a major risk Asia s Economic Outlook: Selected Countries (In US$ Billion and In % Y-o-Y, 9-) China s Nominal (1) GDP and Real GDP Growth (In US$ Billion, and In % Y-o-Y, 9-) Japan s Nominal (1) GDP and Real GDP Growth (In US$ Billion, and In % Y-o-Y, 9-) In US$ Billion In % In US$ Billion In %, 1, 1, 1,, 1,, India's Nominal (1) GDP and Real GDP Growth (In US$ Billion, and In % Y-o-Y, 9-) In US$ Billion In %, 1 3, 1, 1, Australia s Nominal (1) GDP and Real GDP Growth (In US$ Billion, and In % Y-o-Y, 9-) In US$ Billion In %, 1, 3 1, South Korea s Nominal (1) GDP and Real GDP Growth (In US$ Billion, and In % Y-o-Y, 9-) In US$ Billion In %, 8, 1, 1, Philippines Nominal (1) GDP and Real GDP Growth (In US$ Billion, and In % Y-o-Y, 9-) In US$ Billion In % Indonesia s Nominal (1) GDP and Real GDP Growth (In US$ Billion, and In % Y-o-Y, 9-) In US$ Billion In % 1, 8 Thailand s Nominal (1) GDP and Real GDP Growth (In US$ Billion, and In % Y-o-Y, 9-) In US$ Billion In % 1 1, Real GDP Growth Note: (1) Projections of decreasing GDP, when applicable, are partially driven by lower oil prices and depreciating currencies against the US$ Source: World Economic Outlook, IMF, Apr. 1 1 Looking Ahead

11 THE MENA REGION S POLITICAL TURMOIL HINDERS NET OIL IMPORTING COUNTRIES GROWTH while net oil exporters are affected by lower oil prices Despite a predicted pick-up in growth for 1, most MENA countries remain vulnerable because of their political instability.their fiscal balances still need to be restored to provide buffers against shocks. Moreover, structural reforms are still required to generate employment and address infrastructure gaps and inequality MENA s Economic Outlook: Overview of Major Regional Economies (In Current US$ Billion, 1 and In % Y-o-Y Real GDP Growth Rate, 1-1) Morocco. Algeria. Tunisia 3. Libya. Mauritania.7 Lebanon. Jordan 3.8 Iraq 1.3 Kuwait Iran. 1.8 Egypt. Saudi Arabia 3..7 Bahrain Qatar 7.1 UAE 3. Oman. Sudan Yemen (In Current US$ Billion, 1) < N/A % Size= Y-o-Y Real GDP Growth (In %, 1-1) Sample Size= 3.% Source: World Economic Outlook, IMF, Apr. 1 Looking Ahead 1

12 SOLID GROWTH IN SUB- SAHARAN AFRICA IS LIKELY TO CONTINUE although financial vulnerabilities, weakening external demand and further drops in commodity prices are major risks Sub-Saharan Africa s robust growth is expected to continue because of strong external demand and high levels of public and private investment. The drop in commodity prices is likely to affect the two largest economies South Africa and Nigeria. Humanitarian crises, instability, and, in certain countries, financial vulnerabilities are among the other ongoing risks Africa s Economic Outlook Overview of Major Regional Economies (In Current US$ Billion, 1 and In % Y-o-Y Real GDP Growth Rate, 1-1) Nigeria and Real GDP Growth (In US$ Billion and In % Y-o-Y, 9-) Mali Senegal Niger. Eritrea. Burkina Faso Guinea. Chad Nigeria Ethiopia Benin 3. Sierra Leone Liberia Cote Ghana South Sudan 3. Central African d'ivoire Togo -1.. Republic 7.7 Cameroon.7. Equatorial Guinea Democratic Uganda.9-1. Republic of Gabon the Congo Kenya. Congo 9. Rwanda. Burundi 7..8 Tanzania South Africa and Real GDP Growth (In US$ Billion and In % Y-o-Y, 9-) Nominal (1) GDP (In Current US$ Billion, 1) < > - % Real GDP Growth Angola. Size= Y-o-Y Real GDP Growth (In %, 1-1) Sample Size=.% Zambia.7.8 Namibia. Zimbabwe Botswana. Swaziland 1.9. Lesotho. South Africa Malawi. Mozambique. Mozambique and Real GDP Growth (In US$ Billion and In % Y-o-Y, 9-) 3 1. Madagascar Note: (1) Projections of decreasing GDP, when applicable, are partially driven by lower oil prices and depreciating currencies against the US$ Source: World Economic Outlook, IMF, Apr. 1 1 Looking Ahead

13 THE UK IS EXPECTED TO OVERTAKE FRANCE IN TERMS OF GDP AT PPP, Egypt to overtake Argentina and Philippines to overtake South Africa 1/1 will see growth in the GDP of many emerging market economies, particularly in Africa and Asia. Moreover, the dip in economic activity in Latin America will result in many Asian economies overtaking major LAC players, as exemplified by Vietnam overtaking Venezuela GDP at PPP Takeovers (In Rank and In International $ Billion, 1 and 1) China US India Japan Germany Russia Brazil Indonesia 18,97 18,1 7,997,83 3,81 3,8 3,9, , 1, 1, 1, 1,8,,,,,8 UK,9, France,81,3 1 Egypt Argentina Philippines South Africa Bangladesh Algeria Vietnam 3 3 Iraq Venezuela Myanmar 7 7 Denmark 8 GDP at PPP 1 1 Rank # 1 # 1 Source: World Economic Outlook, IMF, Apr. 1 Looking Ahead 17

14 IN TERMS OF NOMINAL GDP, INDIA OVERTAKES BRAZIL WHILE RUSSIA DROPS BELOW SOUTH KOREA, MEXICO AND SPAIN Deflation in many European and some Latin American countries has led to minimal growth in nominal GDP. Similar to trends in GDP at PPP, much of Asia continues to grow, with many Asian economies overtaking European and Latin American economies Takeovers (In Rank and In US$ Billion, 1 and 1) 1 3 US China Japan Germany UK France 18,1,1,1 3,,83,7 8 1, 1, 1, 1, 1,8,,, India,, Brazil 1,9,33 8 South Korea 1,17 1,3 1 Mexico 1,3 1,83 1 Spain 1,3 1,7 1 1 Russia 1,17 1, Turkey Netherlands Argentina Thailand Austria Malaysia Denmark Rank # 1 # 1 Source: World Economic Outlook, IMF, Apr Looking Ahead