"Ascent after Decline", Otaviano Сanuto

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Otaviano Canuto (Vice President, Head of Poverty Reduction and Economic Management (PREM), World Bank)
"Ascent after Decline: Regrowing Global Economies after the Great Recession"

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"Ascent after Decline", Otaviano Сanuto

  1. 1. Ascent after Decline:regrowing global economies after the Great Recession Otaviano Canuto Vice President and Head of Network Poverty Reduction and Economic Management The World Bank www.worldbank.org/prem Moscow, April 4, 2012
  2. 2. Available to download atwww.worldbank.org/prem/vp/publications 2
  3. 3. Complex Global Scenario in 2010-2011● Complex scenario for AEs (slow growth) – Limits to fiscal and monetary policy in AEs as a countervailing factor v-a-v deleveraging – Dubious results of unconventional monetary policy (with some undesirable effects on future prices)● Inflationary pressure and asset price overshooting in emerging markets● Sovereign debt crisis in the Eurozone+ Political dynamics in North Africa and Middle East+ Consequences of natural disasters in Japan and Thailand
  4. 4. Vicious Circle - Advanced Economies Recovery Fiscal Problems & Negative Outlook for Debt Dynamics Sovereign Risk •Loss of value in •Weak Job Marketsovereign bonds & •Low C, Low I stocks •Deleveraging•Market Cap losses •Fiscal Problems •Funding Needs Reduced forecast •Lack of adequate Weak Credit for Economic K Financial Risk Multiplier Growth •Liquidity Trap •Low Credit Extension
  5. 5. Impacts on Emerging Economies• World Trade & Activity Contraction• More Capital Flows Volatility (Sudden Stops after Floods?)• Commodities Prices Accommodation or a Decreasing Path ?• Compounding Effects: Eurozone banks deleveraging, US uncertain growth prospects and China deceleration• EME with smaller room of maneuver (comp w 2008-2009), assessing policy v-a-v local cycles
  6. 6. Developing countries have been resilient in part because trend output remains de-coupled 6
  7. 7. After narrowing during the recession, externalimbalances could widen again as growth recoversRebalancing growth a key element of structural reform agenda Current Account Balances (2000-15; percent of World GDP) G-20 Large Oil Exporters ROW Deficit ROW Surplus G-20 Deficit Emg G-20 Deficit Adv G-20 Surplus Emg G-20 Surplus Adv WORLD SUM G-20 3 2 1 0 -1 -2 -3 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15Source: IMF data and projections
  8. 8. Fast GDP recovery in developing regionsSource: World Bank 8
  9. 9. Toward a switchover of locomotives in the global economy Developing countries (growth rates) Growth Interdependence 9
  10. 10. Scope for autonomous growth versus gravity forces toward a low-growth pathI. (Overall) low degree of leverage [public and private balance sheets in good shape]II. Technological convergence gapIII. Social trickle-down of growth and rising middle classesIV. Trade, structural change and global rebalancing of demand and supplyV. Natural resources as a blessing or a curse 10
  11. 11. Developing countries are driving world trade Developing countries’ share in Developing countries’ contribution world and South-South trade to growth in world trade50% 100%40% 80%30% 60%20% 40%10% 20%0% 1990 1994 1998 2002 2006 2010 0% 1991–95 1996–2000 2001–05 2006–10 DCs share in world imports DCs share in HIC exports HICs share in growth in world imports Intra-DC imports as share of total DC imports DCs share in growth in world imports Source: World Bank WITS, IMF DOTS
  12. 12. Natural resources as a blessing or a curse Real Oil and Non-Oil Commodity Price 350 Indexes 1900-2020 * 300 Non-Oil 250 200 150 100 Oil 50 0 1900 1905 1910 1915 1920 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020* Indexes, 2000 = 100. Sources: BP Statistical Review of World Energy 2010. Grilli andYang (1988);Pfaffenzeller et al (2007). World Bank estimates 2004-10, forecasts 2011-20.Source: Canuto, O. and Giugale, M. (eds.), “The day after tomorrow”, ch. 5 12
  13. 13. Technological achievements rise with income levels 13
  14. 14. Thank you!www.worldbank.org/prem/vp/publicationswww.project-syndicate.org/contributor/3943www.huffingtonpost.com/otaviano-canuto 14

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