World Economic Outlook
Slowing Growth, Rising Risks
September 2011
©2011 International Monetary Fund
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The September 2011 edition of the World Economic Outlook assesses the prospects for the global economy, which is now in a dangerous new phase. Global activity has weakened and become more uneven, confidence has fallen sharply recently, and downside risks are growing. Against a backdrop of unresolved structural fragilities, a barrage of shocks hit the international economy this year, including the devastating Japanese earthquake and tsunami, unrest in some oil-producing countries, and the major financial turbulence in the euro area. Two of the forces now shaping the global economy are high and rising commodity prices and the need for many economies to address large budget deficits. Chapter 3 examines the inflationary effects of commodity price movements and the appropriate monetary policy response. Chapter 4 explores the implications of efforts by advanced economies to restore fiscal sustainability and by emerging and developing economies to tighten fiscal policy to rebuild fiscal policy room and in some cases to restrain overheating pressures.
| Contents |
| Assumptions and Conventions | |||
| Further Information and Data | |||
| Preface | |||
| Foreword | |||
| Executive Summary |
Chapter 1: Global Prospects and Policies
| Slowing Global Activity |
| Renewed Financial Instability |
| More Uneven Expansion |
| Economic Slack alongside Signs of Overheating |
| Risks Are Clearly to the Downside |
| Policy Challenges |
| National Perspectives on Policy Challenges |
| Multilateral Perspectives on Policy Challenges |
| Appendix 1.1. Commodity Market Developments and Prospects |
| References |
Chapter 2: Country and Regional Perspectives
| The United States: Weakening Again amid Daunting Debt Challenges |
| Europe: Enduring Economic and Financial Turbulence |
| Commonwealth of Independent States: Moderate Growth Performance |
| Asia: Securing a More Balanced Expansion |
| Latin America and the Caribbean: Moving toward More Sustainable Growth |
| Sub-Saharan Africa: Sustaining the Expansion |
| Middle East and North Africa: Growth Stalling amid Uncertainty |
| References |
Chapter 3: Target What You Can Hit: Commodity Price Swings and Monetary Policy
|
| Commodity Price Swings and Inflation |
| Monetary Policy and Food Price Shocks: A Simulation-Based Perspective |
| Policy Implications for Responding to Commodity Price Shocks |
| Appendix 3.1. Economies in the Data Set |
| Appendix 3.2. Technical Appendix |
| References |
Chapter 4: Separated at Birth? The Twin Budget and Trade Balances
| Estimating the Strength of the Twin Deficits Link |
| Insights from Model-Based Simulations |
| Summary and Implications for the Outlook |
| Appendix 4.1 Data Construction and Sources |
| Appendix 4.2 Statistical Methodology, Robustness Checks, and Selected Additional Results on Export and Import Responses |
| Appendix 4.3 Global Integrated Monetary and Fiscal Model (GIMF) |
| References |
Annex: IMF Executive Board Discussion of the Outlook, August 2011 |
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| Statistical Appendix | |||
| Assumptions | |||
| What's New | |||
| Data and Conventions | |||
| Classification of Countries | |||
| General Features and Composition of Groups in the World Economic Outlook Classification | |||
| Table A. Classification by World Economic Outlook Groups and Their Shares in Aggregate GDP, Exports of Goods and Services, and Population, 2010 | |||
| Table B. Advanced Economies by Subgroup | |||
| Table C. European Union | |||
| Table D. Emerging and Developing Economies by Region and Main Source of Export Earnings | |||
| Table E. Emerging and Developing Economies by Region, Net External Position, and Status as Heavily Indebted Poor Countries | |||
| Box A1. Economic Policy Assumptions Underlying the Projections for Selected Economies | |||
| List of Tables | |||
| Output (Tables A1–A4) | |||
| Inflation (Tables A5–A7) | |||
| Financial Policies (Table A8) | |||
| Foreign Trade (Table A9) | |||
| Current Account Transactions (Tables A10–A12) | |||
| Balance of Payments and External Financing (Tables A13–A15) | |||
| Flow of Funds (Table A16) | |||
| Medium–Term Baseline Scenario (Table A17) | |||
| List of Tables Part B (available on the web only) | |||
| Output (Tables B1–B2) | |||
| Inflation (Tables B3–B4) | |||
| Financial Policies (Tables B5–B10) | |||
| Foreign Trade (Tables B11–B13) | |||
| Current Account Transactions (Tables B14–B17) | |||
| Balance of Payments and External Financing (Tables B18–B20) | |||
| External Debt and Debt Service (Tables B21–B25) | |||
| Medium-Term Baseline Scenario (Table B26) | |||
| World Economic Outlook, Selected Topics |
| Boxes | |||||
| Chart Chart Chart |
Data Data Data |
1.1 | Slow Recovery to Nowhere? A Sectoral View of Labor Markets in Advanced Economies | ||
| Chart | Data | 1.2 | Credit Boom-Bust Cycles: Their Triggers and Policy Implications | ||
| Chart | Data | 1.3 | Are Equity Price Drops Harbingers of Recession? | ||
| Chart Chart Chart |
Data Data Data |
1.4 | Financial Investment, Speculation, and Commodity Prices | ||
| Chart Chart |
Data Data |
1.5 | External Liabilities and Crisis Tipping Points | ||
| Chart Chart Chart |
Data Data Data |
3.1 | Inflation in Sub-Saharan Africa during the 2008 Commodity Price Surge | ||
| Chart Chart |
Data Data |
3.2 | Food Price Swings and Monetary Policy in Open Economies | ||
| A.1 | Economic Policy Assumptions Underlying the Projections for Selected Economies | ||||
| Tables | |||||
| 1.1. | Overview of the World Economic Outlook Projections | ||||
| 1.2. | Global Oil Demand and Production by Region | ||||
| 1.2.1. | What Triggers Credit Booms | ||||
| 1.3.1. | Summary Statistics for Real Equity Price Growth | ||||
| 1.3.2. | Predicting New Recessions with Financial Market Variables | ||||
| 1.5.1. | Probit Estimates of Crisis Probability | ||||
| 1.5.2. | Model's Predictive Power | ||||
| 2.1. | Selected Advanced Economies: Real GDP, Consumer Prices, Current Account Balance, and Unemployment | ||||
| 2.2. | Selected European Economies: Real GDP, Consumer Prices, Current Account Balance, and Unemployment | ||||
| 2.3. | Commonwealth of Independent States: Real GDP, Consumer Prices, Current Account Balance, and Unemployment | ||||
| 2.4. | Selected Asian Economies: Real GDP, Consumer Prices, Current Account Balance, and Unemployment | ||||
| 2.5. | Selected Western Hemisphere Economies: Real GDP, Consumer Prices, Current Account Balance, and Unemployment | ||||
| 2.6. | Selected Sub-Saharan African Economies: Real GDP, Consumer Prices, Current Account Balance, and Unemployment | ||||
| 2.7. | Selected Middle East and North African Economies: Real GDP, Consumer Prices, Current Account Balance, and Unemployment | ||||
| 3.1. | Gasoline Pass-through from Oil Prices | ||||
| 3.2. | Flour and Bread Pass-through from Wheat Prices | ||||
| 3.1.1. | Variations in Inflation: Sub-Saharan Africa | ||||
| 3.1.2. | Food Inflation Dynamics | ||||
| 3.1.3. | Inflation Dynamics | ||||
| 3.1.4. | Macroeconomics Environment: Sub-Saharan Africa | ||||
| 4.1. | Data Sources | ||||
| Tables | |||||
| A1. | Summary of World Output | ||||
| A2. | Advanced Economies: Real GDP and Total Domestic Demand | ||||
| A3. | Advanced Economies: Components of Real GDP | ||||
| A4. | Emerging and Developing Economies by Country: Real GDP | ||||
| A5. | Summary of Inflation | ||||
| A6. | Advanced Economies: Consumer Prices | ||||
| A7. | Emerging and Developing Economies: Consumer Prices | ||||
| A8. | Major Advanced Economies: General Government Fiscal Balances and Debt | ||||
| A9. | Summary of World Trade Volumes and Prices | ||||
| A10. | Summary of Balances on Current Account | ||||
| A11. | Advanced Economies: Balance on Current Account | ||||
| A12. | Emerging and Developing Economies: Balance on Current Account | ||||
| A13. | Emerging and Developing Economies: Net Financial Flows | ||||
| A14. | Emerging and Developing Economies: Private Financial Flows | ||||
| A15. | Emerging and Developing Economies: Reserves | ||||
| A16. | Summary of Sources and Uses of World Savings | ||||
| A17. | Summary of Word Medium-Term Baseline Scenario | ||||
| Online Tables | |||||
| B1. | Advanced Economies: Unemployment, Employment, and Real per Capita GDP | ||||
| B2. | Emerging and Developing Economies: Real GDP | ||||
| B3. | Advanced Economies: Hourly Earnings, Productivity, and Unit Labor Costs in Manufacturing | ||||
| B4. | Emerging and Developing Economies: Consumer Prices | ||||
| B5. | Summary of Financial Indicators | ||||
| B6. | Advanced Economies: General and Central Government Net Lending/Borrowing and Excluding Social Security Schemes | ||||
| B7. | Advanced Economies: General Government Structural Balances | ||||
| B8. | Advanced Economies: Exchange Rates | ||||
| B9. | Emerging and Developing Economies: General Government Net Lending/Borrowing and Overall Fiscal Balance | ||||
| B10. | Emerging and Developing Economies: Broad Money Aggregates | ||||
| B11. | Advanced Economies: Export Volumes, Import Volumes, and Terms of Trade in Goods and Services | ||||
| B12. | Emerging and Developing Economies by Region: Total Trade in Goods | ||||
| B13. | Emerging and Developing Economies by Source of Export Earnings: Total Trade in Goods | ||||
| B14. | Advanced Economies: Current Account Transactions | ||||
| B15. | Emerging and Developing Economies: Balances on Current Account | ||||
| B16. | Emerging and Developing Economies by Region: Current Account Transactions | ||||
| B17. | Emerging and Developing Economies by Analytical Criteria: Current Account Transactions | ||||
| B18. | Summary of Balance of Payments, Financial Flows, and External Financing | ||||
| B19. | Emerging and Developing Economies by Region: Balance of Payments and External Financing | ||||
| B20. | Emerging and Developing Economies by Analytical Criteria: Balance of Payments and External Financing | ||||
| B21. | Summary of External Debt and Debt Service | ||||
| B22. | Emerging and Developing Economies by Region: External Debt by Maturity and Type of Creditor | ||||
| B23. | Emerging and Developing Economies by Analytical Criteria: External Debt by Maturity and Type of Creditor | ||||
| B24. | Emerging and Developing Economies: Ratio of External Debt to GDP | ||||
| B25. | Emerging and Developing Economies: Debt-Service Ratios | ||||
| B26. | Emerging and Developing Economies, Medium-Term Baseline Scenario: Selected Economic Indicators | ||||
| Figures | |||||
| Chart | Data | 1.1 | Global Indicators | ||
| Chart | Data | 1.2 | Financial Strains in Europe and the United States | ||
| Chart | Data | 1.3 | Recent Financial Market Developments | ||
| Chart | Data | 1.4 | Prospects for Near-Term Activity | ||
| Chart | Data | 1.5 | Global Outlook | ||
| Chart | Data | 1.6 | Current and Forward-Looking Growth Indicators | ||
| Chart | Data | 1.7 | Balance Sheets and Saving Rates | ||
| Chart | Data | 1.8 | Emerging Market Conditions | ||
| Chart | Data | 1.9 | Emerging Market Economies with Strong Credit Expansion | ||
| Chart | Data | 1.10 | Measures of Monetary Policy and Liquidity in Selected Advanced and Emerging Market Economies | ||
| Chart | Data | 1.11 | General Government Fiscal Balances and Public Debt | ||
| Chart | Data | 1.12 | Cyclical Conditions | ||
| Chart | Data | 1.13 | Global Projection Model Estimates of the Output Gap | ||
| Chart | Data | 1.14 | Global Inflation | ||
| Chart | Data | 1.15 | Risks to the Global Outlook | ||
| Chart | Data | 1.16 | WEO Downside Scenario | ||
| Chart | 1.17 | Overheating Indicators for the G20 Countries | |||
| Chart | Data | 1.18 | Policy Requirements in Emerging Market Economies | ||
| Chart | Data | 1.19 | External Developments | ||
| Chart | Data | 1.20 | Global Imbalances | ||
| Chart | Data | 1.21 | Employment and Unemployment | ||
| Chart | Data | 1.22 | Drivers of Global Growth and Rebalancing | ||
| Chart | Data | 1.23 | Commodity Prices | ||
| Chart | Data | 1.24 | World Energy Market Developments | ||
| Chart | Data | 1.25 | Developments in Base Metal Markets | ||
| Chart | Data | 1.26 | Recent Developments in Markets for Major Food Crops | ||
| Chart | Data | 2.1 | Current Global Growth versus Precrisis Average | ||
| Chart | Data | 2.2 | Output Gaps and Inflation | ||
| Chart | Data | 2.3 | United States and Canada: Current Growth versus Precrisis Average | ||
| Chart | Data | 2.4 | United States: Struggling to Gain a Foothold | ||
| Chart | Data | 2.5 | Europe: Current Growth versus Precrisis Average | ||
| Chart | Data | 2.6 | Europe: An Uneven Performance and Elevated Risks | ||
| Chart | Data | 2.7 | Commonwealth of Independent States: Current Growth versus Precrisis Average | ||
| Chart | Data | 2.8 | Commonwealth of Independent States: A Gradual Recovery | ||
| Chart | Data | 2.9 | Asia: Current Growth versus Precrisis Average | ||
| Chart | Data | 2.10 | Asia: A Bright Spot in the World Economy | ||
| Chart | Data | 2.11 | Latin America and the Caribbean: Current Growth versus Precrisis Average | ||
| Chart | Data | 2.12 | Latin America: Maintaining the Growth Momentum | ||
| Chart | Data | 2.13 | Sub-Saharan Africa: Current Growth versus Precrisis Average | ||
| Chart | Data | 2.14 | Sub-Saharan Africa: Continued Strength | ||
| Chart | Data | 2.15 | Middle East and North Africa: Current Growth versus Precrisis Average | ||
| Chart | Data | 2.16 | Middle East and North Africa: Weakening Activity in an Uncertain Environment | ||
| Chart | Data | 3.1 | World Commodity Prices, 2000–11 | ||
| Chart | Data | 3.2 | World Commodity Prices, 1957–2011 | ||
| Chart | Data | 3.3 | Food Price Forecasts | ||
| Chart | Data | 3.4 | Pass-through from World Inflation to Domestic Inflation | ||
| Chart | Data | 3.5 | Variability of Real Domestic Prices | ||
| Chart | Data | 3.6 | Share of Food in the Consumption Basket | ||
| Chart | Data | 3.7 | Contribution of Food and Transportation to Headline Inflation | ||
| Chart | Data | 3.8 | Response of Inflation Expectations to Inflation Surprises | ||
| Chart | Data | 3.9 | Pass-through from International to Domestic Food Price Inflation | ||
| Chart | Data | 3.10 | Response to a Food Price Shock in a Stylized Emerging and Developing Economy | ||
| Chart | Data | 3.11 | Inflation-Output Policy Frontier | ||
| Chart | Data | 3.12 | Response to a Food Price Shock in a Stylized High-Credibility Emerging and Developing Economy | ||
| Chart | Data | 3.13 | Response to a Food Price Shock in a Stylized Advanced Economy | ||
| Chart | Data | 3.14 | One-Time versus Persistent Food Price Shocks | ||
| Chart | Data | 3.15 | Response to a Food Price Shock amid Current Cyclical Conditions | ||
| Chart | Data | 4.1 | Incidence of Action-Based Fiscal Policy Changes by Year | ||
| Chart | Data | 4.2 | Effects on the Current Account of a 1 Percent of GDP Fiscal Consolidation | ||
| Chart | Data | 4.3 | Effects on Economic Activity of a 1 Percent of GDP Fiscal Consolidation | ||
| Chart | Data | 4.4 | Effects on Saving and Investment of a 1 Percent of GDP Fiscal Consolidation | ||
| Chart | Data | 4.5 | Effects on the Composition of Saving and Investment of a 1 Percent of GDP Fiscal Consolidation | ||
| Chart | Data | 4.6 | Effects on Export and Import Volumes of a 1 Percent of GDP Fiscal Consolidation | ||
| Chart | Data | 4.7 | Effects on Exchange Rates, Prices, and Interest Rates of a 1 Percent of GDP Fiscal Consolidation | ||
| Chart | Data | 4.8 | Effects of a 1 Percent of GDP Fiscal Consolidation under Pegged and Nonpegged Exchange Rate Regimes | ||
| Chart | Data | 4.9 | Effects of a 1 Percent of GDP Fiscal Consolidation under Constrained Monetary Policy: GIMF Simulations | ||
| Chart | Data | 4.10 | Effects of a Synchronized Global 1 Percent of GDP Fiscal Consolidation: GIMF Simulations | ||
| Chart | Data | 4.11 | Planned Fiscal Adjustment and the Current Account Impact: GIMF Simulations | ||
| Chart | Data | 4.12 | Robustness: Effects on the Current Account of a 1 Percent of GDP Fiscal Consolidation | ||
| Chart | Data | 4.13 | Effects on the Current Account of a 1 Percent of GDP Fiscal Policy Change | ||
| Chart | Data | 4.14 | Fiscal Instruments and Their Effects on the Current Account | ||