World Economic Outlook

Transcription

1 World Economic Outlook Marco E. Terrones Assistant to the Director Research Department, IMF May 2012 The views expressed in this presentation are those of the author and do not necessarily represent those of the IMF or IMF policy.

2 Outline Where do we stand in the recovery process? What are the risks? What needs to be done?

3 Put ongoing recovery into historical perspective To shed light on the following questions: How different is the ongoing recovery from past recoveries? How do developments across the AE and EMEs compare with those of earlier episodes?

4 But what is a global recovery? Period of increasing economic activity following a global recession. A global recession is define as a decline in world real GDP per capita. Since 1960, there are four global recessions: 1975, 1982, 1991, and The 2009 one stands as the most severe and synchronized global recession.

5 The ongoing recovery is on track with past global recoveries World (Per capita GDP, Indexed=100 at the trough; PPPW) are projected

6 Diverging Fortunes in Recoveries 130 Advanced Countries (Per capita GDP, Indexed=100 at the trough, PPPW) 130 Emerging Markets (Per capita GDP, Indexed=100 at the trough, PPPW) are projected are projected are projected Average of Previous Recoveries Current Recovery

7 Legacies of crisis led to disapointing growth in consumption in AE s Advanced Countries Real Consumption (p er-capita grow th; ppp w eighted) Real Consumption (per capita, PPP weighted growth) Emerging Market Countries is forecast Year of the Recession 1 Year After is forecast Years After 3 Years After

8 and weak growth in investment in AE s But not in EMEs. Real Investment (per capita, PPP weighted growth) Advanced Economies Real Investment (p er-capita; ppp w eighted) Emerging Market Economies is forecast is forecast Year of the Recession 1 Year After 2 Years After 3 Years After

9 Credit and housing markets remain weak in the AEs But not in EMEs Advanced Countries (Real Credit, Indexed=100 at the trough, market W) Emerging Markets (Real Credit, Indexed=100 at the trough, market W) Average of Previous Recoveries Current Recovery

10 Labor markets are weaker than in past recoveries 10 Advanced Countries (Unemployment rate, LFW) are projected 10 Emerging Markets (Unemployment rate, LFW) are projected Average of Previous Recoveries Current Recovery

11 Challenge: Public debt is high in AE s. Public Debt (% of GDP) Advanced economies Emerging and developing economies World G

12 Pressures from markets for fiscal consolidation Sovereign Bond Yields (10 year-us dollar return) Mexico Brazil Colombia Spain Italy Greece

13 Fiscal consolidation is being implemented Fiscal Consolidation (change in the structural balance; percentage points of potential GDP) Portugal Greece Spain Ireland Italy U.K. France U.S. Germany Canada Japan

14 Challenge: Private sector deleveraging in AE s ,0-0,3 Bank and Household Deleveraging Projected Fall in Bank Lending Supply, Properties in foreclosure (ten thousands; RHS) Household debt (% of disposable income; LHS) House Prices (index; LHS) , , ,2-1,5 % of 2011 GDP % of domestic credit , United States Euro area

15 Challenge: EMEs are dealing with volatile capital inflows 8 Capital Flows to Emerging Markets and Developing Economies Greece Crisis ($US billion; weekly) Ireland Crisis ECB LTRO

16 Recovery in LA has been strong domestic demand driven Contribution to Growth (annualiz ed quart erly percent change) 10 LA6 Headline and Core Inflation (12 month percent change) Headline Target Core Headline (Colombia) 5 8 Core (Colombia) Private Consu m ption -15 Pu blic Consu m ption Gross Investm ent 4-20 Net Exports -25 GDP Growth Q1 2008Q2 2009Q3 2010Q4 Dec-07 Nov-08 Nov-09 Nov-10 Nov-11

17 Strong capital inflows and ToT led to rapid credit growth 140 Real Per Capita Private Credit (2009 Q1 = 100) 160 Real Effective Exchange Rate (January 2009=100) Peru Brazil Colombia Chile Mexico Uruguay Brazil Chile Colom bia 100 Peru Mexico Uru gu ay

18 Outline Where do we stand in the recovery process? What are the risks? What needs to be done?

19 Risks around the projections remain tilted to the downside 90 percent confidence interval 90 percent confidence itnerval (April 2011 WEO) Baseline Upside: 1. Stronger investment in AE 2. Dropping oil risk premium 3. Stronger EU policies Downside: 1. More stress in euro area 2. Higher oil prices 3. Lower EM output 4. Disruptions to global bond markets

20 Euro Area: Vicious Cycles GROWTH vicious cycles FISCAL BANKS

21 Emerging Asia Emerging Europe Other Adv. Europe CIS MENA SSA Dev. Asia LAC Adv. Asia USA+CAN Other Adv. Europe Emerging Europe USA+ CAN LAC CIS MENA Adv. Asia SSA Spillovers from Euro Area problems Exports of Goods to the Euro Area (2010) Euro Area Bank Claims (% of GDP; Sep. 2011) % of GDP (LHS) 15 % of exports (RHS)

22 What regions will be more affected? Peak Deviation of Output from WEO Baseline

23 Risk: Higher oil prices WEO Downside Scenario for a Disruption in the Global Oil Supply (percent or percentage point deviation from baseline) 0,0-0,3-0,6-0,9-1,2-1,5-1,8 GDP Loss after Two Years US EA JP LA EAS Rise in Inflation after One Year US EA JP LA EAS 0,8 0,6 0,4 0,2 0,0

24 Outline Where do we stand in the recovery process? What are the risks? What needs to be done?

25 What needs to be done? Advanced Economies Fiscal consolidation: Not too much, not too little Not too fast, not too slow Monetary and liquidity policies should continue to be accommodative Structural reforms to boost long-term productivity and employment Support for the unemployed

26 EMEs and Developing Economies Rebuilding macroeconomic policy room Strengthening prudential policies and frameworks Promoting more inclusive growth

27 LA Economies (For more see REO) Rebuild fiscal policy room Careful with social and infrastructure spending Remain vigilant to signs of overheating and financial excesses Use macro-prudential policies and monitor the financial and corporate sectors. Inflationary expectations must remain well-anchored in some economies.

28 LA Economies. Avoid credit booms (Mendoza and Terrones, 2008 and 2012) They are associated with capital inflows, financial sector reforms, and TFP gains. o 47 percent of the CB in EMEs were preceded by large capital inflows v. 33 percent in the AEs o 30 percent of the CB in EMEs were preceded by financial sector reforms v. 22 percent in the AEs They are often associated with crisis (banking crisis, currency crisis, and sudden stops). o Banking crises are observed in ½ of the CB in EMEs and 1/ 3 of the CB in AE. o Currency crises are observed in 2/ 3rds of the CB in EMEs and 40 percent of the CB in AE o Sudden stops are observed in 1/ 3 rd of the CB in EMEs and 14 percent of the CB in AE

29 All Economies More coordination of financial policies; reform of financial stability frameworks Strengthening the global firewall

30 Thank You