Global Economic Prospects

Transcription

1 Global Economic Prospects Back from the Brink? Andrew Burns World Bank Prospects Group April 12, 212 1

2 Amid some signs of improvement, global recovery remains fragile First quarter of 212 has been generally positive, with reduction in financial uncertainty and firming activity outside of high-income Europe Prospects for 212 will remain weak due to strong headwinds from: high-income fiscal consolidation and deleveraging; high oil prices; developing-country capacity constraints; and weak carry-over; Balance of risks has shifted: a marked deterioration of conditions in Europe still possible but less likely possible of major supply disruption to oil markets risks from domestic imbalances (high-current account; inflation; and fiscal deficits) in several large middle-income countries potential for disruptive fluctuations in volatile capital flows to developing countries 2

3 1,6 1,2 CDS spreads for most high-spreads countries have eased but some may be rising again 5-yr sovereign credit-default swap, basis points, Jan 21- Apr. 212 Portugal Ireland Spain Italy Belgium 8 4 Jan-1 Jun-1 Nov-1 Apr-11 Sep-11 Feb-12 Source: Datastream and World Bank Prospects Group. 3

4 Financial conditions have eased but remain tight in many high-income countries Credit default swap rates, bps USA Norway Great Britain Iceland Sweden Japan Israel Czech Republic Denmark Poland Bosnia Hungary 8 Most Recent Value 25 6 Post July 211 maximum July 211 level 2 8 bps Germany Netherlands France Austria Slovakia Belgium Slovenia Spain Italy Ireland Portugal Source: Datastream and World Bank Prospects Group. 4

5 Financial conditions in many developing countries have retreated close to July levels Credit default swap rates, bps Thailand China Malaysia PhillipinesIndonesia Russia Turkey Latvia Lithuania 8 6 Most Recent Value Post July 211 maximum July 211 level Peru Chile Brazil Mexico ColombiaUruguay Morocco Egypt Venezuela Argentina Source: Datastream and World Bank Prospects Group. 5

6 Business outlook has improved but is weak (especially in Europe and China) Manufacturing purchasing managers index (PMI), points Global Other high-income European Union Dev (ex China) China Jan 1 Apr 1 Jul 1 Oct 1 Jan 11 Apr 11 Jul 11 Oct 11 Jan 12 Source: World Bank, Markit/Haver Analytics. 6

7 Industrial activity is picking up world wide Industrial production, percent growth, 3m/3m saar Other High-income (ex Japan, EA) Euro Area Other Developing Brazil, India /1/211 3/1/211 5/1/211 7/1/211 9/1/211 11/1/211 1/1/212 Source: World Bank Prospects Group. 7

8 Global export volumes are accelerating Merchandise export volumes, % 3m/3m saar growth Developing Other-high-income Euro Area Jan-1 Apr-1 Jul-1 Oct-1 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Source: Datastream and World Bank Prospects Group. 8

9 Global imports are recovering but remain very subdued in Europe Merchandise import volumes, % 3m/3m saar growth World Developing Other-high-income Euro Area Jan-1 Apr-1 Jul-1 Oct-1 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Source: Datastream and World Bank Prospects Group. 9

10 Significant headwinds will keep growth moderate Fiscal consolidation in the high-income world Deleveraging of European banks Higher oil prices Capacity constraints and domestic imbalances in major developing countries Carry-over effects from weak growth last year 1

11 Deleveraging and fiscal consolidation are holding-back growth Annualized increase in lending, Euro Area 3m/3m saar Oct-5 Jan-7 Apr-8 Jul-9 Oct-1 Jan-12 Change in structural deficit, percent of GDP Euro Area United States Japan Source: European Central Bank, Datastream, IMF. 11

12 Bond flows have soared, but bank lending and IPOs remain weak 3-month moving average ($ billion) 3 25 Bond issuance Syndicated bank loans Equity placements Jan-9 Jun-9 Nov-9 Apr-1 Sep-1 Feb-11 Jul-11 Dec-11 Source: Dealogic and World Bank staff calculations. 12

13 $ billion 35 3 De-leveraging is cutting into banklending East-Asia & Pacific Sub-Saharan Africa 25 2 S. Asia & Middle-East & N. Africa Latin America & Caribbean Europe & Central Asia Q4 211-Q1 211-Q2 211-Q3 211-Q4 212-Q1 Source: Dealogic and World Bank staff calculations. 13

14 Higher oil prices likely to result in weaker growth for oil importers Percent change in level of GDP due to increase in oil prices since January GEP.3 Developing countries High-income countries.2.1 Oil exporters Oil importers Oil exporters Oil importers Source: World Bank simulations 14

15 Signs of overheating or limited policy space in many large middle-income countries Debt/GDP (/1) Gov't bal. (reverse axis) Output Gap Inflation Current acct Bal. (reverse axis) China Brazil Turkey India Indonesia Zero Source: World Bank, Development Prospects Group. 15

16 Despite strengthening of activity, annual growth in 212 will remain weak Projected GDP growth Low-income Middle-income High-income World Source: World Bank, Development Prospects Group. 16

17 Modest regional growth through 214 Projected GDP growth High-income East-Asia & Pacific Europe & Central Asia Latin America & Caribbean Middle-East & North Africa South Asia Sub-Saharan Africa Source: World Bank, Development Prospects Group. 17

18 Global trade will recover, but high-income import demand to remain weak Annual % change import of goods and services High-income Developing Source: World Bank, Development Prospects Group. 18

19 Over the next decade South-South trade will grow to be as large as North-South trade Between 1997 and 21 the share of developingcountry exports destined to other developing countries rose from 23 to 37% Over past decade High-income Europe s share in Sub-Saharan Africa s exports has fallen from 4 to 25 percent, China s has increased from 5 to 18 percent Based on current trends South-South trade will be as large as South-North trade within 1 years 19

20 Falling spare capacity behind driving higher oil prices Oil price/barrel nominal and real (Jan 25) USD OPEC spare capacity, millions barrels/day OPEC Spare Capacity 14 Nominal oil price Real Oil price Jan-1 Jan-2 Jan-3 Jan-4 Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12. Sources: World Bank, International Energy Agency. 2

21 A major oil shock could cut sharply into global growth Simulated impact of a $5 increase in oil prices Deviation from baseline, % of GDP 1.5 High-income countries 1. Developing countries Oil exporters Oil importers Oil exporters Oil importers Source: World Bank, DEC Prospects Group. 21

22 A sharp deterioration of conditions in High-income Europe remains a risk Sharp downturn would threaten developing countries: with high-levels of short-term debt that are heavily dependent on remittances or tourism Commodity exporters could see sharp downturn in incomes and government revenues 22

23 Concluding remarks While economic news during the first two months of 212 has remained positive, headwinds will constrain growth in 212 The risk of an acute crisis in Europe has declined, but remains -- with potentially serious consequences for developing countries Volatile capital flows could complicate policy in middle-income countries A serious disruption in oil supply could severely constrain growth and stress fiscal and current account balances in some countries 23