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DMSDR1S-4375212-v1-January 2011 WEO Update (to Depts).DOCX January 24, 2011 (12:47 PM12:40 PM)
-10-8-6-4-2024681012
Figure 1. Global GDP Growth
(Percent; quarter over quarter, annualized)
Source: IMFstaff estimates.Emerging
 
anddeveloping economiesAdvancedeconomies
20071210110809
World
 FOR RELEASE:In South Africa (ZAF): 10:00 a.m., Jan. 25, 2011STRICTLY CONFIDENTIALUNTIL RELEASEDIn Washington (EDT): 3:00 a.m., Jan. 25, 2011
Global Recovery Advances but Remains Uneven
The two-speed recovery continues. In advanced economies, activity has moderated less thanexpected, but growth remains subdued, unemployment is still high, and renewed stresses in theeuro area periphery are contributing to downside risks. In many emerging economies, activityremains buoyant, inflation pressures are emerging, and there are now some signs of overheating,driven in part by strong capital inflows. Most developing countries, particularly in sub-Saharan Africa, are also growing strongly. Global output is projected to expand by 4½ percent in 2011(Table 1 and Figure 1), an upward revision of about ¼ percentage point relative to the October 2010
World Economic Outlook 
(WEO). This reflects stronger-than-expected activity in the second half of 2010 as well as new policy initiatives in the United States that will boost activitythis year. But downside risks to the recovery remain elevated. The most urgent requirements for robust recovery are comprehensive and rapid actions to overcome sovereign and financial troubles in the euro area and policies to redress fiscal imbalances and to repair and reform financial systems in advanced economies more generally. These need to be complemented with policies that keep overheating pressures in check and facilitate external rebalancing in keyemerging economies.
 
The global recovery is proceeding
Global activity expanded at an annualized rate of  just over 3½ percent in the third quarter of 2010.A slowdown from the 5 percent growth rate of the second quarter of 2010 was expected, but thethird-quarter rate was better than forecast in theOctober 2010 WEO, owing to stronger-than-expected consumption in the United States andJapan. Stimulus measures were partly responsiblefor the strengthened outturn, especially in Japan.More generally, signs are increasing that privateconsumption—which fell sharply during thecrisis—is starting to gain a foothold in major advanced economies (Figure 2). Growth inemerging and developing economies remainedrobust in the third quarter, buoyed by well-entrenched private demand, still-accommodative policy stances, and resurgentcapital inflows.
 
2 WEO Update, January 2011
Estimates200920102011201220112012201020112012
World Output
1
 –0.65.04.44.50.20.04.74.54.4Advanced Economies–3.43.02.52.50.3–0.12.92.62.5
United States–2.62.83.02.70.7–0.32.73.22.7Euro Area–4.11.81.51.70.0–0.12.11.22.0Germany–4.73.62.22.00.20.04.31.22.7France–2.51.61.61.80.00.01.71.51.9Italy–5.01.01.01.30.0–0.11.31.21.4Spain–3.7–0.20.61.5–0.1–0.30.40.81.9Japan–6.34.31.61.80.1–0.23.31.42.4United Kingdom–4.91.72.02.30.00.02.91.52.6Canada–2.52.92.32.7–0.40.02.72.72.6Other Advanced Economies –1.25.63.83.70.10.04.54.72.9Newly Industrialized Asian Economies–0.98.24.74.30.2–0.15.96.23.1
Emerging and Developing Economies
2
2.67.16.56.50.10.07.27.06.8
Central and Eastern Europe–3.64.23.64.00.50.24.33.53.9Commonwealth of Independent States–6.54.24.74.60.1–0.13.54.84.3Russia–7.93.74.54.40.20.03.44.64.3Excluding Russia–3.25.45.15.2–0.1–0.1. . .. . .. . .Developing Asia7.09.38.48.40.00.09.18.68.4China9.210.39.69.50.00.09.79.59.5India5.79.78.48.00.00.010.37.98.0ASEAN-5
3
1.76.75.55.70.10.15.16.45.2Latin America and the Caribbean–1.85.94.34.10.3–0.14.85.04.3Brazil–0.67.54.54.10.40.05.25.14.0Mexico–6.15.24.24.80.3–0.23.25.04.5Middle East and North Africa1.83.94.64.7–0.5–0.1. . .. . .. . .Sub-Saharan Africa2.85.05.55.80.00.1. . .. . .. . .South Africa–1.72.83.43.8–0.1–0.13.63.44.1
Memorandum
European Union–4.11.81.72.00.0–0.12.51.42.2World Growth Based on Market Exchange Rates–2.13.93.53.60.2–0.1. . .. . .. . .
World Trade Volume (goods and services)–10.712.07.16.80.10.2. . .. . .. . .
ImportsAdvanced Economies–12.411.15.55.20.30.1. . .. . .. . .Emerging and Developing Economies–8.013.89.39.2–0.6–0.1. . .. . .. . .ExportsAdvanced Economies–11.911.46.25.80.20.3. . .. . .. . .Emerging and Developing Economies–7.512.89.28.80.10.2. . .. . .. . .
Commodity Prices (U.S. dollars)
Oil
4
 –36.327.813.40.310.1–4.1. . .. . .. . .Nonfuel (average based on world commodity export weights)–18.723.011.0–5.613.0–2.4. . .. . .. . .

Consumer Prices
Advanced Economies0.11.51.61.60.30.11.51.61.6Emerging and Developing Economies
2
5.26.36.04.80.80.36.54.74.4
London Interbank Offered Rate (percent)
5
On U.S. Dollar Deposits1.10.60.70.9–0.1–0.5. . .. . .. . .On Euro Deposits1.20.81.21.70.20.4. . .. . .. . .On Japanese Yen Deposits0.70.40.60.20.2–0.2. . .. . .. . .
Note: Real effective exchange rates are assumed to remain constant at the levels prevailing during November 18–December 16, 2010. Country weights used to construct aggregategrowth rates for groups of economies were revised. When economies are not listed alphabetically, they are ordered on the basis of economic size. The aggregated quarterly data areseasonally adjusted.
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 78 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 $78.93 in 2010; the assumed price based onfutures markets is $89.50 in 2011 and $89.75 in 2012. 
5
Six-month rate for the United States and Japan. Three-month rate for the Euro Area.
Table 1. Overview of the
World Economic Outlook 
Projections
(Percent change, unless noted otherwise)
Year over Year Difference from October 2010 WEO ProjectionsQ4 over Q4ProjectionsProjections
 
3 WEO Update, January 2011
During the second half of 2010, global financialconditions broadly improved, amid lingeringvulnerabilities. Equity markets rose, risk spreadscontinued to tighten, and bank lending conditionsin major advanced economies became less tight,even for small and medium-sized firms. Nonetheless, pockets of vulnerability persisted;real estate markets and household income werestill weak in some major advanced economies(for example, United States), and securitizationremained subdued. And, in an echo of last May’sevents, financial turbulence reemerged in the periphery of the euro area in the last quarter of 2010. Concerns about banking sector losses andfiscal sustainability—triggered this time by thesituation in Ireland—led to widening spreads inthese countries, in some cases reaching highs notseen since the launch of the European Economicand Monetary Union. Funding pressures alsoreappeared, although to a lesser extent thanduring the summer. One key difference was morelimited financial market spillovers to other countries. The turmoil in mid-2010 led to a spikein global risk aversion and a scaling back of exposures in other regions, including emergingmarkets. During the recent bout of turbulence,markets have been more discriminating:measures of risk aversion have not risen, equitymarkets in most regions have posted significantgains, and financial stresses have been limited
859095100105110115120125
1620242832364044480501001502002503003504004500100200300400500600700040080012001600200080100120140160180200220
Figure 3. Recent Financial Market Developments
Sources: Bloomberg Financial Markets; Datastream; and IMFstaff calculations.Vertical lines on each panel correspond to May 10 and November 30, 2010.ECB = European Central Bank; LIBOR = London interbank offered rate; OIS = Overnightindex swap.VIX = Chicago Board Options Exchange Market Volatility Index, a measure of the impliedvolatility of options on the S&P 500 index; VXY = JPMorgan emerging markets impliedvolatility index, a measure of the aggregate volatility in currency markets.TOPIX = Tokyo stock price index; MSCI = emerging markets stock price index.Bilateral exchange rates against the U.S. dollar (increase denotes depreciation).APSP = average petroleum spot price.
Commodity Price Indices(Jan. 1, 2010 = 100)Exchange Rate Indices(Jan. 1, 2010 = 100)
2
EuroYenRenminbiSwiss francSterlingMetalsFoodRaw materialsCrude oil (APSP)Gold
Government Bond Spreads(two-year yield spreads over German bunds, basis points)
Jan.10
Greece
Jan.11Apr.
IrelandPortugalSpain
859095100105110115120
Equity Indices(Jan. 1, 2010 = 100)
S&P 500Euro First 300TOPIXMSCI Emerging Markets
Money Market Spreads(basis points)
Jan.10Jan.11Apr.
ECB depositfacility(billions of euros;rightscale)EuroLIBOR–OISspread(three-monthforward; leftscale)
16
JulyJuly
(right scale)
Oct.Oct.Jan.10Jan.11Apr.JulyOct.Jan.10Jan.11Apr.JulyOct.Jan.10Jan.11Apr.JulyOct.
01020304050
Implied Volatility(percent)
Emerging Markets(VXY)U.S. (VIX)Jan.10Jan.11Apr.JulyOct.
1
234
5
5
34
6
Figure 2. Recent Economic Indicators
Sources: Haver Analytics; and IMFstaff calculations.Not all economies are included in the aggregations. Aggregates are computed on thebasis of purchasing-power-parity (PPP) weights unless noted otherwise.Argentina, Brazil, Bulgaria, Chile, China, Colombia, Estonia, Hungary, India, Indonesia,Latvia, Lithuania, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Romania, Russia,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.PPP-weighted averages of metal products and machinery for euro area, plants andequipment for Japan, plants and machinery for the United Kingdom, and equipment andsoftware for the United States.
123
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Quarterly World Growth(percent; quarter over quarter,annualized)
10:Q3200708Oct. 2010WEOforecast09-4-3-2-10123
Employment Growth inAdvanced Economies(percent; three-month movingaverage (3mma) over previous3mma, annualized)
Nov.1020070809
-40-30-20-1001020
Real Gross Fixed Investment(annualized percent change frompreceding quarter)
of which:machinery and equipment
4
-404812
Real Private Consumption(annualized percent changefrom preceding quarter)
10:Q32007080910:Q320070809
4
Emergingeconomies
2
Advancedeconomies
3
Emergingeconomies
2
Advancedeconomies
3
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