High Quality
Open the downloaded document, and select print from the file menu (PDF reader required).
July 8, 2009
Contractionary Forces Receding But Weak Recovery Ahead
The global economy is beginning to pull out of a recession unprecedented in the post–World War II era, but stabilization is uneven and the recovery is expected to be sluggish. Economic growth during 2009–10 is now projected to be about ½ percentage points higher than projected in the April 2009
World Economic Outlook (WEO),
reaching 2.5 percent in 2010. Financial conditions have improved more than expected, owing mainly to public intervention, and recent data suggest that the rate of decline in economic activity is moderating, although to varying degrees among regions. Despite these positive signs, the global recession is not over, and the recovery is still expected to be slow, as financial systems remain impaired, support from public policies will gradually diminish, and households in countries that suffered asset price busts will rebuild savings. The main policy priorityremains restoring financial sector health. Macroeconomic policies need to stay supportive, while preparing the ground for an orderly unwinding of extraordinary levels of public intervention. At the same time, given weak internal demand prospects in a number of current account deficit countries,including the United States, policies need to sustain stronger demand in key surplus countries.
Stabilization is uneven and recovery willlikely be sluggish
.The world economy is stabilizing, helped byunprecedented macroeconomic and financial policy support. However, the recession is notover and the recovery is likely to be sluggish.Following a disappointing first quarter, duringwhich the global economy contracted almostas fast as during the fourth quarter of 2008,(Figure 1), high-frequency data point to areturn to modest growth at the global level(Figure 2). However, the advanced economiesas a group are still projected not to show asustained pickup in activity until the secondhalf of 2010, consistent with the April 2009WEO forecast.Accordingly, global activity is forecast tocontract by 1.4 percent in 2009 and to expand by 2.5 percent in 2010, which is 0.6 percentage point higher than envisaged in the April 2009WEO (Table 1). The higher annual averagegrowth rate for 2010 largely reflects carryover from a markup in growth during the final half of 2009. On a fourth-quarter-over-fourth-quarter basis, real GDP growth is projected at2.9 percent in 2010, compared with 2.6 percentin the April WEO forecast.
-10-8-6-4-2024681012
Figure 1. Global GDP Growth
(Percent; quarter-over-quarter, annualized)
Source: IMF staff estimates.Emerging anddeveloping economiesAdvancedeconomies
20051008090607
World
2
ae . vervew o te
or conomc utoo
roectons
(Percent change, unless otherwise noted)
Estimates
2007
20082009201020092010
200820092010
World output
1
5.13.1-1.42.5-0.10.6
0.20.02.9
Advanced economies2.70.8-3.80.60.00.6
-1.8-2.21.3
United States2.01.1-2.60.80.20.8
-0.8-1.41.7
Euro area2.70.8-4.8-0.3-0.60.1
-1.7-3.80.6
Germany2.51.3-6.2-0.6-0.60.4
-1.8-4.60.0
France2.30.3-3.00.40.00.0
-.-..
Italy1.6-1.0-5.1-0.1-0.70.3
-.-..
Spain3.71.2-4.0-0.8-1.0-0.1
-.-..
Japan2.3-0.7-6.01.70.21.2
-4.4-1.80.9
United Kingdom2.60.7-4.20.2-0.10.6
-1.8-2.50.5
Canada2.50.4-2.31.60.20.4
-1.0-1.52.5
Other advanced economies4.71.6-3.91.00.20.4
-2.8-1.62.3
Newly industrialized Asian economies5.71.5-5.21.40.40.6
-4.9-0.92.6
Emerging and developing economies
2
8.36.01.54.7-0.10.7
3.33.35.1
Africa6.25.21.84.1-0.20.2
.........
Sub-Sahara6.95.51.54.1-0.20.3
.........
Central and eastern Europe5.43.0-5.01.0-1.30.2
.........
Commonwealth of Independent States8.65.5-5.82.0-0.70.8
.........
Russa.5.-.5.5
-.5
.
.-.-.
Excluding Russia9.85.4-3.93.2-1.00.1
.........
Developing Asia10.67.65.57.00.70.9
.........
China13.09.07.58.51.01.0
...
India9.47.35.46.50.90.9
4.85.86.7
ASEAN-5
3
6.34.8-0.33.7-0.31.4
1.91.64.4
Middle East6.35.22.03.7-0.50.2
.........
Western Hemisphere5.74.2-2.62.3-1.10.7
.........
Brazil5.75.1-1.32.50.00.3
1.31.52.5
Mexico3.31.3-7.33.0-3.62.0
-1.7-4.03.1
Memorandum
European Union3.11.1-4.7-0.1-0.70.2
.........
World growth based on market exchange rates3.82.0-2.61.7-0.10.7
.........
World trade volume goods and servces7..-..-..
.........
ImportsAdvanced economies4.70.4-13.60.6-1.50.2
.........
Emerging and developing economies13.89.4-9.60.8-0.80.2
.........
ExportsAdvanced economies6.22.0-15.01.3-1.50.8
.........
Emerging and developing economies9.54.1-6.51.4-0.10.2
.........
Commodity prices (U.S. dollars)
Oil
4
10.736.4-37.623.18.82.9
.........
Nonfuel (average based on worldcommodity export weights)14.17.5-23.82.24.1-2.2
.........
Consumer prices
vance economes......
...
Emerging and developing economies6.49.35.34.6-0.4-0.1
7.64.23.7
London interbank offered rate (percent)
5
On U.S. dollar deposits5.33.01.21.4-0.30.0
.........
On euro deposits4.34.61.41.8-0.2-0.2
.........
n Japanese yen epos
ts....-.-.
.........
Note: Real effective exchange rates are assumed to remain constant at the levels prevailing during May 7-June 4, 2009. Country weights used to constructaggregate growth rates for groups of countries were revised. When economies are not listed alphabetically, they are ordered on the basis of economic size.
1
The quarterly estimates and projections account for 90 percent of the world purchasing-power-parity weights.
2
The quarterly estimates and projections account for approximately 76 percent of the emerging and developing economies.
3
Indonesia, Malaysia, Philippines, Thailand, and Vietnam.
4
Simple average of prices of U.K. Brent, Dubai, and West Texas Intermediate crude oil. The average price of oil in U.S. dollars a barrel was $97.03 in 2008;the assumed price based on future markets is $60.50 in 2009 and $74.50 in 2010.
5
Six-month rate for the United States and Japan. Three-month rate for the euro area.
Q4 over Q4Projections
Projections2009 WEO ProjectionsDifference from AprilYear over Year
3
-30-25-20-15-10-505101520-80-60-40-2002040603035404550556065
Manufacturing PurchasingManagers Index(index)Merchandise Exports
Figure 2. Selected High-Frequency Indicators
(Annualized percent change of 3-month moving average over previous3-month moving average unless otherwise noted)
Sources: Haver Analytics; and IMF staff calculations.Argentina, Brazil, Bulgaria, Chile, China, Colombia, Estonia, Hungary, India, Indonesia,Latvia, Lithuania, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Romania, Russia,Slovak Republic, South Africa, Thailand, Turkey, Ukraine, and Venezuela.Australia, Canada, Czech Republic, Denmark, euro area, Hong Kong SAR, Israel, Japan,Korea, New Zealand, Norway, Singapore, Sweden, Switzerland, Taiwan Province of China,United Kingdom, and United States.
12
May09Apr.0920050607082005060708-15-10-50510152025
Retail Sales
2005060708Apr.09World
Industrial Production
World2005060708Apr.09Advancedeconomies
2
Emergingeconomies
1
Emergingeconomies
1
Advancedeconomies
2
Emergingeconomies
1
Advancedeconomies
2
WorldEmergingeconomies
1
Advancedeconomies
2
Going forward, the pace of recovery willdepend on the balance between opposingforces. The downward drag exerted by thefinancial shock, the sharp fall of global trade,and the general increase in uncertainty andcollapse of confidence is graduallydiminishing. However, supportive forces arestill weak. Many housing markets have yet to bottom out. Importantly, financial marketsremain impaired and bank balance sheets stillneed to be cleaned and institutionsrestructured. Cuts in policy interest rates,continued provision of ample liquidity, crediteasing, public guarantees, and bank recapitalization have appreciably loweredconcerns about systemic failure and havesupported intermediation (as discussed in theJuly 2009
Global Financial Stability Report Market Update
). Consistent with thesedevelopments, financial stress indexes for advanced and emerging economies havereceded since the beginning of 2009(Figure 3).
1
However, the improvements arefar from uniform across markets and countries.In particular, bank lending conditions areexpected to remain tight and external financingconditions constrained for a considerable time.
-505101520
Figure 3. Financial Stress in Advanced and EmergingEconomies
(Purchasing-power-parity-weighted average; stress index deviation fromaverage)
Source: IMFstaff calculations.The financial stress indices are expressed as a deviation from average since mid 1990s.The components of the indices for advanced and emerging economies differ.United StatesWesternEurope
2007May0908
Advancedeconomyaggregate
-4-20246810
LatinAmericaEmergingEuropeEmergingAsia
Advanced EconomiesEmerging Economies
Japan
2007Apr.0908
Emergingeconomyaggregate
1
1
At the same time, commodity prices haverebounded ahead of the recovery (Figure 4).The recent rally in commodity prices has beenstrong and broad-based, reflecting improvedmarket sentiment, U.S. dollar depreciation, andcommodity-specific factors. In the oil market,
1
The Financial Stress Index captures episodes of impaired financial intermediation by assessing marketresponses in securities markets, exchange markets, andthe banking sector (see Balakrishnan, Danninger,Elekdag, and Tytell, 2009,
The Transmission of Financial Stress from Advanced to Emerging Economies
, IMF Working Paper No. 09/133).
Add a Comment