World Economic Situation and Prospects 2013 · World Economic Outlook ... S&P 500 Euro Stoxx 50...
Transcript of World Economic Situation and Prospects 2013 · World Economic Outlook ... S&P 500 Euro Stoxx 50...
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World Economic
Situation and
Prospects 2013
Pingfan Hong
March 21 2013
At G-24 TGM
Washington DC
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Outline
1. World Economic Outlook
• Global and regional growth prospects
• Trends in international trade and finance
2. Downside Risks and Uncertainties
• Euro area crisis
• US fiscal uncertainty
• Hard landing in major developing countries
3. Key Policy Issues
• Macroeconomic policy stance
• International policy coordination
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Global growth projected to pick up slightly
– downside risks remain
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Synchronized world economies
Annual GDP growth (%)
-8
-6
-4
-2
0
2
4
6
8
10
2004 2006 2008 2010 2012 2014
Developed economies Economies in transition Developing economies
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Contributions to WGP growth by major groups
44%35% 33% 31%
42%
3%
4% 4% 4%
4%
53%61% 63% 65%
54%
2010 2011 2012 2013 2014
Developed economies Economies in transition Developing economies
Developing economies drive global growth
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Developed economies:
trapped in low-growth?
Annual GDP Growth (%)
-6
-4
-2
0
2
4
6
USA European Union Japan
2007 2008 2009 2010 2011 2012 2013 2014
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Economies in transition: moderate growth
Annual GDP Growth (%)
-10
-5
0
5
10
CIS and Georgia South-Eastern Europe
2007 2008 2009 2010 2011 2012 2013 2014
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Developing regions: Gradual pick-up in
growth expected
Annual GDP Growth (%)
-2
0
2
4
6
8
10
12
Africa East Asia South Asia Western
Asia
Latin
America
and the
Caribbean
2007 2008 2009 2010 2011 2012 2013 2014
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Annual GDP growth (%)
0
2
4
6
8
10
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Least developed countries: Recovery
projected, growth below potential
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Jobs crisis continues:
Record unemployment in Europe
Monthly unemployment rates (%), Jan 2007 - Feb 2013
0
2
4
6
8
10
12
Jan-0
7
Jul-07
Jan-0
8
Jul-08
Jan-0
9
Jul-09
Jan-1
0
Jul-10
Jan-1
1
Jul-11
Jan-1
2
Jul-12
Jan-1
3
Japan United States EU (27 economies)
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Job losses after the financial crisis:
cyclical or structural?
-7
-6
-5
-4
-3
-2
-1
0
1
0 6 12 18 24 30 36 42 48 54 60 66
Number of months from the employment turning point
De
gre
e o
f e
mp
loy
me
nt
be
low
(-)
or
ab
ov
e (
+)
turn
ing
po
int
lev
el
20011990
2008
19811980 1974
Post-recession employment recovery in the United States
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2
4
6
8
10
2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1
Philippines Brazil
Mexico
Developing countries: Unemployment
trends differ
0
10
20
30
40
50
60
2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1
South Africa - YouthSouth Africa - Total
Quarterly Unemployment Rates (%)
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Annual consumer price inflation rate (%)
-2
-1
0
1
2
3
4
5
2006 2007 2008 2009 2010 2011 2012 2013 2014
United States European Union Japan
Developed economies: Inflationary
pressures remain low
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Developing regions:
Inflation projected to slow
Annual consumer price inflation rate (%)
0
2
4
6
8
10
12
14
2006 2007 2008 2009 2010 2011 2012e 2013f 2014f
Africa (excl. Zimbabwe) East Asia
South Asia Western Asia
Latin America and the Caribbean
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World exports, Jan 2006- Nov 2012
(Jan 2006 = 100)
80
90
100
110
120
130
140
150
160
Ja
n-0
6
Ju
l-0
6
Ja
n-0
7
Ju
l-0
7
Ja
n-0
8
Ju
l-0
8
Ja
n-0
9
Ju
l-0
9
Ja
n-1
0
Ju
l-1
0
Ja
n-1
1
Ju
l-1
1
Ja
n-1
2
Ju
l-1
2
Emerging economies World Developed economies
Uneven recovery in international trade
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International commodity prices:
slight moderation Commodity price (2000=100)
100
150
200
250
300
350
400
450
500
2008 2009 2010 2011 2012 2013Food (All) Agricultural raw materialsMinerals, ores and metals Oil (Brent)
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Stock market indices have recently moved up
40
60
80
100
120
140
160
Ja
n-0
7
Ja
n-0
8
Ja
n-0
9
Ja
n-1
0
Ja
n-1
1
Ja
n-1
2
Ja
n-1
3
S&P 500 Euro Stoxx 50 Nikkei 225 Hang Seng
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Euro area crisis: spreads have come down
10-y government bond yield spread vis-à-vis Germany bund
0
3
6
9
12
15
Jan-
08
Jul-
08
Jan-
09
Jul-
09
Jan-
10
Jul-
10
Jan-
11
Jul-
11
Jan-
12
Jul-
12
Jan-
13
%
0
7
14
21
28
35
Ireland (LHS) Italy (LHS) Portugal (LHS)Spain (LHS) Greece (RHS)
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Financial resources
from the poor to the rich
Net capital flows to emerging markets
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Developing countries piling up
foreign exchange reserves
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ODA far below the target
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Significant changes in real effective
among major reserve currencies
Real effective exchange rates (Jan 2011 = 100)
80
85
90
95
100
105
110
Jan-2011 Jul-2011 Jan-2012 Jul-2012 Jan-2013
United States Euro area Japan
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Developing countries: diverging trends in
real effective exchange rates Real effective exchnage rate (Jan 2011=100)
80
85
90
95
100
105
110
Jan-2011 Jul-2011 Jan-2012 Jul-2012 Jan-2013
Republic of Korea China Brazil South Africa
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1. Further deepening of the euro area crisis • Vicious circle between sovereign risk and bank fragility
• Downward spiral between austerity and recession
• New policies promising, but uncertainties remain
2. From “fiscal cliff” to debt ceiling in the U.S. • No increase in income tax rates for 99% families, but payroll tax
holiday expired
• Automatic government spending cuts activated
• Debt ceiling pending
3. Hard landing in major developing countries • Continued deceleration in fixed investment
• Greater weakness in external demand
Downside Risks
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Soft landing or hard landing ?
GDP growth rate (%)
-2
0
2
4
6
8
10
12
14
16
2000 2002 2004 2006 2008 2010 2012 2014
ChinaBrazilIndia
forecast
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Cyclical risks • Housing bubble
• Local government debt and investment vehicles
• Shadow banking
Structural hurdles • Unbalanced economic structure
• Rising costs of environmental degradation and natural resources depletion.
• Inequality, monopoly
• Turning points in both demographic dividend and Lewis curve
Challenges for macroeconomic policy and reforms
Downside risks for Chinese economy
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Impact of downside risks on
world economy will be substantial
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Macro policy stance in developed economies • Continued fiscal tightening (Japan exception)
• Bold policy actions in Japan
• Open-ended strategy in monetary easing
• Targeting unemployment rate in the US
Macro policy stance in major developing countries • Mild expansionary fiscal combined with neutral monetary in China
• Neutral fiscal combined with expansionary monetary in L.A.
• Limited policy space in some developing countries
Policy suggestions from WESP 2013 • More concerted policy actions
• Focus more on jobs creation
International policy coordination • Global imbalances
Policy issues
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Major developed countries collecting
seigniorage from developing countries
through quantitative easing
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
2005 2006 2007 2008 2009 2010 2011 2012
Developing country foreign reserves
G4: Central bank assets aggregate
$billion
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Are global imbalances still a problem?
-3
-2
-1
0
1
2
3
1997 1999 2001 2003 2005 2007 2009 2011 2013
USA Rest of the WorldOil exporters Germany and JapanEuropean Union less Germany East Asia less ChinaChina
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Misconception in the popularly proposed rebalancing framework:
GDP = Consumption + Investment + Net Export
• This accounting identity does not define the causality
• The components are not independent variables
• Consumption cannot substitute for investment as the driver for long-term growth
• Tradeoff between current consumption and future consumption
• Increasing consumption to GDP ratio now will lead to lower GDP growth in the future
Pitfalls in China’s rebalancing
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Consumption is not a driver for GDP growth
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High investment rate is a necessary condition
for robust GDP growth
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Thank you!