Advance G20 release of OECD Economic Outlook
22
Getting the world economy into higher gear Paris, 6th November 2014 11h00 Paris time Catherine L. Mann OECD Chief Economist Advance G-20 release of Economic Outlook
-
Upload
wendy-stokle -
Category
Economy & Finance
-
view
22.841 -
download
0
Transcript of Advance G20 release of OECD Economic Outlook
Getting the world economy
into higher gear
Paris, 6th November 2014
11h00 Paris time
Catherine L. Mann OECD Chief Economist
Advance G-20 release of Economic Outlook
Key messages
Global growth is modest, with widening differences across countries
Financial risks are rising and volatility is set to increase
Potential growth has slowed, interacting with weak demand
Weakness in the euro area is a major concern
Monetary, fiscal and structural policies must all be employed to address risks and support growth
2
The global economy is stuck in low gear
3
World GDP growth
Per cent, seasonally adjusted annualised rate
-8
-6
-4
-2
0
2
4
6
8
-8
-6
-4
-2
0
2
4
6
8
Average, 1995-2007
Source: Preliminary November 2014 Economic Outlook database..
Trade growth has been weak
4
Trade intensity1
Index, 1990=100
50
100
150
200
250
300
350United States
Trend (1990-2007)
50
100
150
200
250
300
350Japan
50
100
150
200
250
300
350European Union
50
100
150
200
250
300
350BRIICS
1. Index of sum of exports and imports as a ratio of GDP.
Source: Preliminary November 2014 Economic Outlook database.
5
Demand patterns are diverging
.
Non-residential investment per capita
Index, 2005 = 100
Private consumption per capita
Index, 2005 = 100
80
90
100
110
120
80
90
100
110
120 United States Euro area Japan
85
90
95
100
105
110
115
85
90
95
100
105
110
115United States Euro area Japan
Source: OECD national accounts database; Preliminary November 2014 Economic Outlook database; and OECD calculations.
6
Unemployment rate Per cent
Labour market: divergent performance,
but overall slack remains
Number of unemployed persons Millions
Source: Preliminary November 2014 Economic Outlook database.
0
2
4
6
8
10
12
14
0
2
4
6
8
10
12
14 United States Euro area Japan
3.6
5.9
11.5
0
10
20
30
40
50
60
0
10
20
30
40
50
60
Other OECD USA Euro area
10 million
17 million
15 million
7 million
12 million
18 million
7
Trends are also diverging
among emerging economies
.
GDP per capita Volume, 2005=100
80
100
120
140
160
180
200
220
240
80
100
120
140
160
180
200
220
240
China
India
Brazil
Russia
Source: OECD National Accounts database; Preliminary November 2014 Economic Outlook database; IMF WEO
database; Central Statistical Organisation, India; and OECD calculations.
Growth projections for 2015-16
GDP Volume, percentage change
8
Preliminary Economic Outlook (EO) projections - figures will be updated for
incoming data for the complete EO release on 25 November .
Column1 2013 2014 2015 2016
World 3.1 3.3 3.7 3.9
United States 2.2 2.2 3.1 3.0
Euro area -0.4 0.8 1.1 1.7
Japan 1.5 0.9 1.1 0.8
China 7.7 7.3 7.1 6.9
India 4.7 5.4 6.4 6.6
Brazil 2.5 0.3 1.5 2.0
Russia 1.3 0.7 0.0 2.0
Growth projections for 2015-16
9
GDP growth Per cent
Source: Preliminary November 2014 OECD Economic Outlook database.
7.1
6.4
5.4
3.9 3.8 3.7
3.2 3.1 2.7 2.5 2.5
2.2 1.7
1.5 1.1 1.1 1.1
0.9
0.2 0.0
6.9 6.6
6.0
4.2 4.1 3.9
4.0
3.0 2.5
2.4
3.0 2.9
1.9 2.0
0.8
1.8 1.7 1.5 1.0
2.0
-1
0
1
2
3
4
5
6
7
8
-1
0
1
2
3
4
5
6
7
8
2015
2016
10
RISKS
11
The threat of euro area stagnation remains
Inflation HIPC, 12-month percentage change
Note: Shaded bands show +/- one standard deviation based on past variation.
Source: Preliminary November 2014 Economic Outlook database.
GDP Year-on-year percentage change
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
-2
-1
0
1
2
3
4
5
12
Diverging monetary policies could lead to
more volatility for emerging economies
.
Emerging market bonds Total return index, January 2013=100
Portfolio exposure of BRIICS excluding China
85
90
95
100
105
85
90
95
100
105JP Morgan EMBI+ Composite
Tapering talk
-80
-60
-40
-20
0
20
40
60
80
-1
0
1
2
3
4
5
6
7
8
USD Billion Per cent of GDP
Net inflow (RHS)
Cumulative net inflow (LHS)
Source: JP Morgan; Federal Reserve, United States; Datastream; IMF Balance of Payments database; OECD National
Accounts database; and OECD calculations.
13
Financial market volatility: upsurge likely
0
10
20
30
40
50
60
70
80
90
0
10
20
30
40
50
60
70
80
90
VIX index Volatility index based on S&P500 stock index option prices
Note: The blue curves suggest troughs of the VIX.
Source: Chicago Board Options Exchange (CBOE); Datastream.
14
Advanced economy debt levels are high
and credit growth in China is rapid
Debt excluding the financial sector Per cent of GDP
.
China: credit to non-financial private sector
Per cent of GDP
0
20
40
60
80
100
120
140
160
180
200
0
20
40
60
80
100
120
140
160
180
200
Bank lending Non-bank credit
0
100
200
300
400
500
0
100
200
300
400
500
2007 2013 2007 2013 2007 2013
UnitedStates
Euro area Japan
Government
Household
Non-financial corporations
Source: Preliminary November 2014 Economic Outlook database; ECB; OECD Financial accounts; and CEIC.
Potential growth rates could fall further
15
0
2
4
6
8
10
12
0
2
4
6
8
10
12
United States Euro area Japan China India Brazil
1998-2002 2003-2007 2008-2014
Potential GDP growth Annual average, per cent
Source: Preliminary November 2014 OECD Economic Outlook database.
16
POLICIES
Monetary policy: Continued need to support
demand, but more variation in circumstances
US: Policy rates rise from mid-2015
Brazil and Russia: May need to raise rates further
China: Trade-off between sustaining demand and stability
Japan: QQE continue until inflation target sustainably achieved 17
Central bank assets Per cent of GDP
Policy rates Per cent
0
10
20
30
40
50
60
0
10
20
30
40
50
60
United States
Euro area
Japan
Source: Datastream; National Central Banks.
0
2
4
6
8
10
12
14
0
2
4
6
8
10
12
14
Brazil India
Russia China
Existing ECB Measures ECB Policy Options
Very low policy rates (incl. negative
deposit rates)
Open-ended or large-scale asset purchases:
Long-Term Refinancing Operations
(LTROs)
• Increased outright purchases of asset-
backed securities and covered bonds
Targeted Longer-Term Refinancing
Operations (TLTROs)
• Outright purchase of sovereign bonds
Outright purchases of asset-backed
securities and covered bonds
• Outright purchase of investment-grade
corporate bonds
Forward guidance
ECB must act decisively to support growth
and head off deflation
Monetary policy stimulus – beyond measures already announced – is needed in combination with banking union and structural reforms
18
Fiscal policy: flexible and designed to better
support growth
19
Flexibility and discretion within the EU fiscal rules should be used to reduce the drag on demand
Japan must continue to address its fiscal challenges
Fiscal packages should be more supportive of growth
Improvement in underlying primary balance Per cent of potential output
-1
0
1
2
3
4
5
6
7
8
-1
0
1
2
3
4
5
6
7
8
United States Euro area Japan
2010-2014
2015-2016
Source: Preliminary November 2014 Economic Outlook database.
Structural policies: more ambitious reforms
needed to boost growth
Some signs that reform momentum in advanced countries has slowed
Better recent alignment with Going for Growth priorities in the BRIICS
Some laggards are launching reforms – implementation will be key. Other countries need to scale up their ambition. 20
Responsiveness to Going for Growth reform priorities Per cent
0
10
20
30
40
50
60
70
80
0
10
20
30
40
50
60
70
80
Low-responsiveness OECD
High-responsiveness OECD
BRIICS
2011-12 2013-14
Source: Going for Growth (2015, forthcoming).
G-20 reform commitments will
give a welcome impetus to growth
G-20 countries will present growth strategies at the Brisbane summit
OECD/IMF Estimates: Strategies would raise G-20 GDP by about 2% (USD 1.6 trillion) in 2018 if fully implemented
21
Incremental GDP gains by implementation of policy commitments
Per cent
Growth strategy commitments by area
Investment & Infrastructure
31%
Employment 35%
Competition 19%
Trade 15%
. 0
5
10
15
20
25
30
0
5
10
15
20
25
30
2009-2013 2014-2018
Increase in GDP relative to baseline if growthstrategies implemented
Baseline GDP growth (Cumulative)
Source: draft G-20 growth strategies, and OECD calculations.
Key messages
Global growth is modest, with widening differences across countries
Financial risks are rising and volatility is set to increase
Potential growth has slowed, interacting with weak demand
Weakness in the euro area is a major concern
Monetary, fiscal and structural policies must all be employed to address risks and support growth
22
