Global/Regional Economic and Financial Outlook Odd Per Brekk Director IMF Regional Office for Asia and the Pacific APEC SFOM, June 11-12 2015
2015/SFOM13/002 Session: 1 Global/Regional Economic and Financial Outlook Purpose: Information Submitted by: IMF 13 th Senior Finance Officials Meeting Bagac, Philippines 11-12 June 2015
Complex forces shaping the short-term growth outlook Fall in oil prices Actual and expected changes in monetary policy; associated exchange rate swings Less favorable medium-term growth prospects Advanced countries: crisis legacies; aging; weak investment Emerging markets: diminished expectations Real GDP Growth (% yoy) 8 7 6 5 4 3 2 1 0 Emerging Market and Developing Economies World Advanced Economies 2010 2011 2012 2013 2014 2015 2016 Global Aggregates: Headline Inflation (% yoy) Inflation projected to decline in 2015 Main cause: impact of the decline in oil prices Pass-through of lower oil prices into core inflation is expected to remain moderate. Source: International Monetary Fund, World Economic Outlook, April 2015. 2
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10.0 8.0 Real GDP (descending order by 2015 growth rate projections) 2013 2014 2015 2016 6.0 4.0 2.0 0.0-2.0-4.0-6.0 Source: International Monetary Fund, World Economic Outlook, April 2015. 4
2 1 0-1 -2-3 -4 3 2 1 0-1 Impact of Oil Price Decline on Macro forecasts (In percentage points of GDP; growth in percent) Max Min Simple average Commodity exporters GDP Growth S-I (public) S-I (private) Current account balance Max Min Weighted average Simple average Net oil importers Weighted average GDP Growth S-I (public) S-I (private) Current account balance Oil Price Windfall: Impact on the Oil Trade Balance in 2015 (In percent of GDP) Less than 1.5% Between 1.5-3% Greater than 3% Country Oil Price windfall Australia 0.2 Vietnam 0.4 Malaysia 0.7 New Zealand 0.9 China 0.9 Indonesia 1.1 Japan 1.4 Philippines 1.8 Singapore 1.9 India 2.0 Taiwan Province of China 2.1 Korea 2.7 Hong Kong SAR 2.8 Thailand 5.0 Asia (simple average) 1.7 Asia (weighted average) 1.4 Source: IMF staff estimates. Note: Based on 2014 oil trade balance, assuming unchanged quantities and the April 2015 WEO oil price projections for 2015. 5
Policy Interest Rate Expectations (percent; dashed lines are from the October 2014 WEO) (Jan 1994=100) 115 Advanced Economies REER 110 105 100 95 90 85 United States United Kingdom Japan Euro area (percent) 3.5 3.0 2.5 2.0 1.5 U.S. 5-year Rates 5-year 5-year forward inflation swap 5-year government bond yield 1.0 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 5/29/2015 (Jan 1994=100) 115 110 105 100 95 90 85 80 75 70 65 Emerging Economies REER Indonesia China Mexico Russia Sources: International Monetary Fund, World Economic Outlook, April 2015, BIS and Bloomberg. 6
1999 2002 2004 2007 2009 2012 2014 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Spillover Plot: Equity Market Returns and Volatility 90 85 80 75 70 65 60 30 25 20 15 10 5 0-5 -10-15 -20-25 Asia: Equity and Bond Funds Monthly Net Flows (In billions of U.S. dollars) Bond Funds Equity Funds Peak: 2006-07 Mar-15 Equity Returns Spillover Equity Volatility Spillover Note: Includes exchange traded fund flows and mutual fund flows for emerging Asia, Australia, Hong Kong SAR, Korea, New Zealand, Singapore, Sources: Haver Analytics and IMF staff calculations 7
Appreciation --> 20 REER appreciation since June vs 2014 external assessment 15 10 IDN USA HK IND THL CHN PHL 5 0 NZ KOR SGP -5-10 -15 AUS JPN External position <-- weaker EUR stronger--> "moderately" "moderately" MYS "substantially" Sources: IMF Global Data Source; IMF Staff Reports; IMF staff calculations. Sources: Haver Analytics; and IMF staff calculations. 8
Economic policy priorities Advanced Economies: Demand and Supply Demand support to the recovery Boost public infrastructure investment Structural reform to boost potential output (country-specific) Emerging and Developing Economies Address vulnerabilities Increase potential output and infrastructure investment (country-specific) Oil exporters: Use fiscal space for a gradual adjustment of public spending to lower oil prices Allow exchange rate flexibility to cushion the economies All Economies: Lower oil prices as an opportunity to reform energy subsidies and taxes 9
Thank you! APEC SFOM June 11-12 2015