Recent Recent Developments 0

Transcription

1 Recent Developments 0

2 Global activity has slowed noticeably World Trade (annualized percent change of three month moving average over previous three month moving average) Purchasing Managers Index (PMI) (index) Jun Aug. 11 1

3 Equity markets have fallen sharply and volatility has increased drastically Equity Markets (index; 2007=100; national currency) Implied Volatility (percent) May 10, Sep. 11 Sep 11 2

4 Financial stability in the euro area has deteriorated significantly Government Bond Spreads (two year yield spreads over German bunds; basis points) July 21, 2011 Interbank Spreads (three month London interbank offered rate minus three month government bill rate; basis points) July 21, 2011 May 10, 2010 Sep. 11 Sep. 11 3

5 Capital flows to EM have turned negative and various EM currencies have depreciated sharply Equity Fund Flows to Emerging Markets (billions of U.S. dollars, weekly flows) Exchange Rates Indices (Jan. 3, 2011 = 100; bilateral exchange rates against the U.S. dollar) 9/21 Source: EPFR Global. 4

6 Oil prices have retreated Food, Metal, and Oil Prices Jan. 10 Jul. 10 Jan. 11 Aug. 11 5

7 Baseline: Growth Down WEO Real GDP Growth Projections (percent, y/y) 2011 (Current) 2011 (Apr 2011) World U.S. Euro area Japan Brazil Russia India China (Current) 2012 (Apr 2011) Source: IMF, World Economic Outlook. 6

8 Key Factors Behind the Weak Recovery 7

9 To Achieve Strong, Sustained, and Balanced Growth,, Four Conditions: 8

10 1. Reforms are Slow, and Repairs are Tough 9

11 Bank Lending Conditions Bank Lending Conditions Remain Tight (net percentage of respondents tightening loan standards) Tighter lending conditions All firms Sources: Lending surveys by the Bank of England, European Central Bank, Bank of Japan, and the U.S. Federal Reserve for households and corporates; and IMF staff estimates. 10

12 The Dismal U.S. Housing Market U.S. Housing Inventories and Foreclosures (millions of units) U.S. House Prices (percent change; year over year) Sources: Haver Analytics; and IMF staff estimates. 1/ Data from Zillow.com. 1/ FHFA refers to Federal Housing Finance Agency. 2/ NAR refers to National Association of Realtors. 3/ Macro Markets Home Price Expectations Survey. 11

13 2. Internal Rebalancing From Fiscal Stimulus to Private Demand 12

14 Fiscal Adjustment: Generally, On (Linear) Track (percent of fiscal year potential GDP) Cyclically Adjusted Primary Balance, 2011 Cyclically Adjusted Primary Balance, 2012 Singapore Singapore Belgium Germany Italy Iceland Israel Belgium Germany Austria Israel Iceland Italy Japan U.S. U.K. Austria France Netherlands Canada Greece Spain Portugal Japan U.S. U.K. France Netherlands Greece Canada Portugal Spain Sources: IMF, World Economic Outlook; and IMF staff calculations. 13

15 U.S. Confidence and Saving Track Wealth Household Wealth and Confidence (change; year over year) Household Wealth and Saving (ratio to disposable income) 11Q2 Source: Haver Analytics. 14

16 Income Expectations are Surprisingly Pessimistic Expected Change in Family Income 1/ (percent; median; 3 month 3 moving average) Source: University of Michigan, Survey of Consumers. 1/ Shaded bars indicate recessions. 15

17 The Increasing Share of Profits in the U.S. Nonfarm Business Sector Wage Productivity Gap (index; 1950Q1=100) Corporate and Labor Share of the Increase in National Income during Recoveries 1/ (percent) 11Q2 Source: Haver Analytics. 1/ Recoveries are 8 quarters after the trough except where there were not 8 quarters of recovery. 16

18 3. External Rebalancing. Mostly Stalled. 17

19 External Rebalancing: Stalled (percent of domestic GDP) U.S. U.K. Netherlands U.K Italy France Hong Kong SAR China Italy France Korea Japan Germany U.S. Korea Japan Netherlands Germany China Hong Kong SAR Sources: IMF, World Economic Outlook, and IMF staff calculations. 18

20 WEO Forecast and Risks 19

21 Key assumption: financial recovery delayed but not derailed because policy commitments are met. 20

22 Gradual re acceleration in growth from the slowdown in 2011Q2 Real GDP Growth (percent; quarter over quarter, annualized) Advanced Economies Emerging and Developing Economies 21

23 2012: Good growth in EM&DC: > 6 percent Anemic growth in major AE: about 1½1 percent = 4 percent global growth Advanced Economies Real GDP Growth (percent change from a year earlier) Emerging Economies

24 Downward revisions are larger for AE than EM Revisions (percent; current June 2011 Quarterly Update ) 23

25 EM capacity to offset advanced economies weakness is still limited. Country Contributions to Global GDP Growth 1/ (in percent) Country Contributions to Global Consumption Growth 1/ (in percent) /Based on 2007 PPP weights / Based on GDP at 2007 market exchange rates. 2/ Based on 2007 PPP weights. 24

26 U.S. Unemployment Scenarios How Long Will it Take to Recover Lost Jobs? (thousands; persons) Decline in Unemployment (percent) 2030 Sources: Haver Analytics; and Bureau of Labor Statistics. 25

27 Risk for global growth < 2 percent is > 10 percent Prospects for World GDP Growth (percent change)

28 Thank you 27