Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014
-
Upload
andrew-williams-jr-trntv -
Category
Business
-
view
108 -
download
1
description
Transcript of Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014
![Page 1: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/1.jpg)
1
Andrew BurnsWorld BankJanuary 14, 2014
Global Economic
Prospects:Coping with policy normalization
in high-income countries
http://www.worldbank.org/globaloutlook
![Page 2: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/2.jpg)
Jan '12 Jul '12 Jan '13 Jul '13-15
-10
-5
0
5
10
15
United States
Euro Area
Japan
Other high-in-come
Fourth quarter manufacturing suggests continued strengthen in US and Japan, weakness elsewhere
Source: World Bank, Datastream.
Q4Manufacturing output growth, 3m/3m saar
![Page 3: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/3.jpg)
Jan '12 Jul '12 Jan '13 Jul '13-15
-10
-5
0
5
10
15
United States
Euro Area
Japan
Other high-in-come
Fourth quarter manufacturing suggests continued strengthen in US and Japan, weakness elsewhere
Source: World Bank, Datastream.
Q4Manufacturing output growth, 3m/3m saar
![Page 4: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/4.jpg)
Jan '12 Jul '12 Jan '13 Jul '13-15
-10
-5
0
5
10
15
United States
Euro Area
Japan
Other high-in-come
Fourth quarter manufacturing suggests continued strengthen in US and Japan, weakness elsewhere
Source: World Bank, Datastream.
Q4Manufacturing output growth, 3m/3m saar
![Page 5: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/5.jpg)
Jan '12 Jul '12 Jan '13 Jul '13-15
-10
-5
0
5
10
15
United States
Euro Area
Japan
Other high-in-come
Fourth quarter manufacturing suggests continued strengthen in US and Japan, weakness elsewhere
Source: World Bank, Datastream.
Q4Manufacturing output growth, 3m/3m saar
![Page 6: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/6.jpg)
6
Jan '11 Jul '11 Jan '12 Jul '12 Jan '13 Jul '13-15
-10
-5
0
5
10
15
20
India
China
Other developing
Growth firming or solid in most developing countries
Industrial production growth, 3m/3m saar
Source: World Bank, Datastream.
![Page 7: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/7.jpg)
7
Jan '11 Jul '11 Jan '12 Jul '12 Jan '13 Jul '13-15
-10
-5
0
5
10
15
20
India
China
Other developing
Growth firming or solid in most developing countries
Industrial production growth, 3m/3m saar
Source: World Bank, Datastream.
![Page 8: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/8.jpg)
8
Global GDP growth is projected to:
![Page 9: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/9.jpg)
9
Global GDP growth is projected to:
• firm from 2.4% in 2013 to 3.2% this year,
![Page 10: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/10.jpg)
10
Global GDP growth is projected to:
• firm from 2.4% in 2013 to 3.2% this year,• stabilizing at 3.4% and 3.5% in 2015 and
2016
![Page 11: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/11.jpg)
A gradual pick up in growth, led by high-income countries
2000 2002 2004 2006 2008 2010 2012 2014 2016-4
-2
0
2
4
6
8
10
World
High In-come
Middle Income
Low In-come
Percent annual GDP growth
Source: World Bank.
![Page 12: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/12.jpg)
A gradual pick up in growth, led by high-income countries
2000 2002 2004 2006 2008 2010 2012 2014 2016-4
-2
0
2
4
6
8
10
World
High In-come
Middle Income
Low In-come
Percent annual GDP growth
Source: World Bank.
![Page 13: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/13.jpg)
A gradual pick up in growth, led by high-income countries
2000 2002 2004 2006 2008 2010 2012 2014 2016-4
-2
0
2
4
6
8
10
World
High In-come
Middle Income
Low In-come
Percent annual GDP growth
Source: World Bank.
![Page 14: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/14.jpg)
A gradual pick up in growth, led by high-income countries
2000 2002 2004 2006 2008 2010 2012 2014 2016-4
-2
0
2
4
6
8
10
World
High In-come
Middle Income
Low In-come
Percent annual GDP growth
Source: World Bank.
![Page 15: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/15.jpg)
A gradual pick up in growth, led by high-income countries
2000 2002 2004 2006 2008 2010 2012 2014 2016-4
-2
0
2
4
6
8
10
World
High In-come
Middle Income
Low In-come
Percent annual GDP growth
Source: World Bank.
![Page 16: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/16.jpg)
16
Growth in developing countries will pick up from 4.8% in 2013 to a slower than
previously expected 5.3% this year, 5.5% in 2015 and 5.7% in 2016 .
![Page 17: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/17.jpg)
17
Growth in developing countries will pick up from 4.8% in 2013 to a slower than
previously expected 5.3% this year, 5.5% in 2015 and 5.7% in 2016 .
![Page 18: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/18.jpg)
18
Growth in developing countries will pick up from 4.8% in 2013 to a slower than
previously expected 5.3% this year, 5.5% in 2015 and 5.7% in 2016 .
![Page 19: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/19.jpg)
19
Growth in developing countries will pick up from 4.8% in 2013 to a slower than
previously expected 5.3% this year, 5.5% in 2015 and 5.7% in 2016 .
![Page 20: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/20.jpg)
20
Growth in developing countries will pick up from 4.8% in 2013 to a slower than
previously expected 5.3% this year, 5.5% in 2015 and 5.7% in 2016 .
![Page 21: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/21.jpg)
21
0
1
2
3
4
5
6
7
8
9
10
Potential + Cyclical GDP growthPotential GDP growth
Period of gradual acceleration in potential Boom PeriodGrowth slower only
relative to boom
Slower developing country growth is mainly a cyclical phenomenon
Source: World Bank.
GDP and potential GDP, annual growth rate
Post-crisis developing country growth is 2.2 percent slower than during the boom period. All but 0.5 percentage points of that is cyclical
![Page 22: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/22.jpg)
22
0
1
2
3
4
5
6
7
8
9
10
Potential + Cyclical GDP growthPotential GDP growth
Period of gradual acceleration in potential Boom PeriodGrowth slower only
relative to boom
Slower developing country growth is mainly a cyclical phenomenon
Source: World Bank.
GDP and potential GDP, annual growth rate
Post-crisis developing country growth is 2.2 percent slower than during the boom period. All but 0.5 percentage points of that is cyclical
![Page 23: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/23.jpg)
23
0
1
2
3
4
5
6
7
8
9
10
Potential + Cyclical GDP growthPotential GDP growth
Period of gradual acceleration in potential Boom PeriodGrowth slower only
relative to boom
Slower developing country growth is mainly a cyclical phenomenon
Source: World Bank.
GDP and potential GDP, annual growth rate
Post-crisis developing country growth is 2.2 percent slower than during the boom period. All but 0.5 percentage points of that is cyclical
![Page 24: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/24.jpg)
24
Doing better going forward will require focusing on:
![Page 25: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/25.jpg)
25
Doing better going forward will require focusing on:• structural policies: investment in
education, infrastructure and health.
![Page 26: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/26.jpg)
26
Doing better going forward will require focusing on:• structural policies: investment in
education, infrastructure and health.• better regulations to enhance the
growth potential of countries
![Page 27: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/27.jpg)
27
0
1
2
3
4
5
6
7
82012 2013 2014 2015 2016
Growth acceleration to be limited in regions that have already fully recovered
Percent annual GDP growth
Source: World Bank.
![Page 28: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/28.jpg)
28
0
1
2
3
4
5
6
7
82012 2013 2014 2015 2016
Growth acceleration to be limited in regions that have already fully recovered
Percent annual GDP growth
Source: World Bank.
![Page 29: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/29.jpg)
29
0
1
2
3
4
5
6
7
8
2012 2013 2014 2015 2016
Growth acceleration to be limited in regions that have already fully recovered
Percent annual GDP growth
Source: World Bank.
![Page 30: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/30.jpg)
30
0
1
2
3
4
5
6
7
8
2012 2013 2014 2015 2016
Growth acceleration to be limited in regions that have already fully recovered
Percent annual GDP growth
Source: World Bank.
![Page 31: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/31.jpg)
31
0
1
2
3
4
5
6
7
8
2012 2013 2014 2015 2016
Growth acceleration to be limited in regions that have already fully recovered
Percent annual GDP growth
Source: World Bank.
![Page 32: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/32.jpg)
32
0
1
2
3
4
5
6
7
8
2012 2013 2014 2015 2016
Growth acceleration to be limited in regions that have already fully recovered
Percent annual GDP growth
Source: World Bank.
![Page 33: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/33.jpg)
33
0
1
2
3
4
5
6
7
8
2012 2013 2014 2015 2016
Growth acceleration to be limited in regions that have already fully recovered
Percent annual GDP growth
Source: World Bank.
![Page 34: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/34.jpg)
34
0
1
2
3
4
5
6
7
8
2012 2013 2014 2015 2016
Growth acceleration to be limited in regions that have already fully recovered
Percent annual GDP growth
Source: World Bank.
![Page 35: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/35.jpg)
35
0
1
2
3
4
5
6
7
8
2012 2013 2014 2015 2016
Growth acceleration to be limited in regions that have already fully recovered
Percent annual GDP growth
Source: World Bank.
![Page 36: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/36.jpg)
36
The strengthening recovery in high-income countries is most welcome,
but it brings with it risks of disruption as monetary policy
tightens.
![Page 37: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/37.jpg)
37
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
In a smooth adjustment scenario, capital flows to developing countries will ease only marginally
Source: World Bank.
% o
f dev
elop
ing
coun
try
GD
P
![Page 38: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/38.jpg)
38
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0 Smooth adjustment scenario :capital flows decline from 4.6% of developing country GDP in 2013 to 4.0 percent in 2016
In a smooth adjustment scenario, capital flows to developing countries will ease only marginally
Source: World Bank.
% o
f dev
elop
ing
coun
try
GD
P
![Page 39: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/39.jpg)
39
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0 Smooth adjustment scenario :capital flows decline from 4.6% of developing country GDP in 2013 to 4.0% in 2016
In a smooth adjustment scenario, capital flows to developing countries will ease only marginally
Source: World Bank.
% o
f dev
elop
ing
coun
try
GD
P
![Page 40: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/40.jpg)
40
Global trade to grow from an estimated 3.1% in 2013 to 4.6%
this year and 5.1% in each of 2015 and 2016.
![Page 41: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/41.jpg)
41
Global trade to grow from an estimated 3.1% in 2013 to 4.6%
this year and 5.1% in each of 2015 and 2016.
![Page 42: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/42.jpg)
42
Global trade to grow from an estimated 3.1% in 2013 to 4.6%
this year and 5.1% in each of 2015 and 2016.
![Page 43: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/43.jpg)
43
Global trade to grow from an estimated 3.1% in 2013 to 4.6%
this year and 5.1% in each of 2015 and 2016.
![Page 44: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/44.jpg)
44
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
While unlikely a sharp market reaction to tapering could cut deeply into capital flows for a short period
Source: World Bank.
![Page 45: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/45.jpg)
45
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0 If long-term rates in US jump up 100 basis points capital flows could fall by 50 percent or more for several months
While unlikely a sharp market reaction to tapering could cut deeply into capital flows for a short period
Source: World Bank.
![Page 46: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/46.jpg)
46
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0 If long-term rates in US jump up 100 basis points capital flows could fall by 50 percent or more for several months
While unlikely a sharp market reaction to tapering could cut deeply into capital flows for a short period
Source: World Bank.
![Page 47: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/47.jpg)
47
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0 If long-term rates in US jump up 100 basis points capital flows could fall by 50 percent or more for several months
A 200 bp rise could cause capital flows to decline by 80 percent
While unlikely a sharp market reaction to tapering could cut deeply into capital flows for a short period
Source: World Bank.
![Page 48: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/48.jpg)
48
Earlier rapid increase in credit increases the risk of banking-sector crises
Thail
and
Bhutan
Botswan
a
Armen
iaSe
rbiaChina
St. Lu
cia
Vanuatu
Vietnam
Malaysi
a
Morocco
Gambia
Turke
y
Venezu
ela
Leso
tho
Cambodia
Paragu
ay
Lao PDR
Malawi
Romania
Kosovo
Brazil
-
5
10
15
20
25
30
35
40
-
20
40
60
80
100
120
140
160
180 Change in net bank credits, 2012-2007 (% of GDP) Level of banking-sector net credits in 2012, % of GDP
Source: World Bank, IMF.
![Page 49: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/49.jpg)
49
Earlier rapid increase in credit increases the risk of banking-sector crises
Thail
and
Bhutan
Botswan
a
Armen
iaSe
rbiaChina
St. Lu
cia
Vanuatu
Vietnam
Malaysi
a
Morocco
Gambia
Turke
y
Venezu
ela
Leso
tho
Cambodia
Paragu
ay
Lao PDR
Malawi
Romania
Kosovo
Brazil
-
5
10
15
20
25
30
35
40
-
20
40
60
80
100
120
140
160
180
Change in Credit levelCredit levels in 2012
Change in net bank credits, 2012-2007 (% of GDP) Level of banking-sector net credits in 2012, % of GDP
Source: World Bank, IMF.
![Page 50: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/50.jpg)
50
Earlier rapid increase in credit increases the risk of banking-sector crises
Thail
and
Bhutan
Botswan
a
Armen
iaSe
rbiaChina
St. Lu
cia
Vanuatu
Vietnam
Malaysi
a
Morocco
Gambia
Turke
y
Venezu
ela
Leso
tho
Cambodia
Paragu
ay
Lao PDR
Malawi
Romania
Kosovo
Brazil
-
5
10
15
20
25
30
35
40
-
20
40
60
80
100
120
140
160
180
Change in Credit levelCredit levels in 2012
Change in net bank credits, 2012-2007 (% of GDP) Level of banking-sector net credits in 2012, % of GDP
Source: World Bank, IMF.
![Page 51: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/51.jpg)
51
Policy makers need to give thought now to how they would respond to a significant tightening of global financing conditions.
![Page 52: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/52.jpg)
52
Policy makers need to give thought now to how they would respond to a significant tightening of global financing conditions.• Countries with adequate policy buffers and investor
confidence may be able to rely on market mechanisms, counter-cyclical macroeconomic and prudential policies to deal with a decline in flows.
![Page 53: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/53.jpg)
53
Policy makers need to give thought now to how they would respond to a significant tightening of global financing conditions.• Countries with adequate policy buffers and investor
confidence may be able to rely on market mechanisms, counter-cyclical macroeconomic and prudential policies to deal with a decline in flows.
• In other cases, where the scope for maneuvering is more limited, countries may be forced to tighten fiscal policy to reduce financing needs or raise interest rates to incite
additional inflows.
![Page 54: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/54.jpg)
54
Policy makers need to give thought now to how they would respond to a significant tightening of global financing conditions.• Countries with adequate policy buffers and investor confidence
may be able to rely on market mechanisms, counter-cyclical macroeconomic and prudential policies to deal with a decline in flows.
• In other cases, where the scope for maneuvering is more limited, countries may be forced to tighten fiscal policy to reduce financing needs or raise interest rates to incite additional inflows.
• Where adequate foreign reserves exist, these can be used to moderate the pace of exchange rate adjustments, while a loosening of capital inflow regulation and incentives for foreign direct investment might help smooth adjustment.
![Page 55: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/55.jpg)
55
By improving the longer term outlook, credible reform
agendas can go a long way towards boosting investor and
market confidence.
![Page 56: Global Economic Prospects Coping with Policy Normalization in High-Income Countries January 2014](https://reader033.fdocuments.in/reader033/viewer/2022061300/54c72adc4a7959792c8b460c/html5/thumbnails/56.jpg)
56
Andrew BurnsWorld BankJanuary 14, 2014
Global Economic
Prospects:Coping with policy normalization
in high-income countries
http://www.worldbank.org/globaloutlook