Faltering global             economic               growth                Rob Vos             United Nations              ...
Main messages1.       The world economy is at a critical juncture     –     Risk of double-dip in major developed economie...
Global recovery is slowing 5      4.1    4.0                   4.0 4                                                      ...
Protracted slow growth inmajor developed economies  6                                             4.0  4           3.0    ...
Growth is also moderating in developing countries                                                                     9.29...
Despite a rebound, therecovery in transitioneconomies remains fragile6                                                  4....
Growth is also moderating in developing countries                                                                     9.29...
Recovery in Latin Americafollows a decelerating trend10                                          2010   2011     2012 8   ...
Growth pattern acrosscountries in the region isuneven
Less favourable externalenvironment…• World trade moderating notably• A dip in the rising trend of  commodity prices, and ...
… and major downside risksand uncertainties • Persistent high unemployment compounded   by early withdrawal fiscal stimulu...
Risks for (near) double-dipglobal recession 5      4.1    4.0                   4.0 4                                     ...
The downside scenario                                                    DeviationGDP growth (%)            Downside scena...
Uncertainties and risks inLatin America1. Greatest risk: possible recession in Europe   and the United States with strong ...
Policy challenges1. No premature fiscal austerity, rather more   short-term stimulus is needed2. … that is internationally...
More coordinated stimulus,not less, is needed to move outof jobs crisis  5                                          Policy...
Faltering global                economic                  growth                United Nations,               17 January, ...
Hyperlinked slides                     18
Moderating growth ofworld trade                       19
Food and oil prices volatile…….but on the rise again FIGURE I.7 OF WESP                                20
Volatile portfolio flows toemerging markets            Equity Funds, net flows to EMEs (weekly flows in USD billions)     ...
Rising borrowing costs also foremerging market economies    GRAPH I.6 OF WESP                                  22
Slow post-recessionemployment recovery                      23
Still spreading sovereign debtdistress in Europe   GRAPH I.13B OF WESP                                 24
Strong volatility among majorcurrencies(NER against dollar)   Figure I.10 of WESP                                25
Reversal of strongappreciations in EMEs    Figure I.11 of WESP                          26
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  1. 1. Faltering global economic growth Rob Vos United Nations Mexico City 18 January, 2012www.un.org/esa/policy
  2. 2. Main messages1. The world economy is at a critical juncture – Risk of double-dip in major developed economies – Growth in emerging economies is moderating2. Downside risks and uncertainties – Contagion of sovereign debt crisis, combined with fragility in banking sector – Persistent high unemployment – Political tensions leading to policy paralysis3. Policy challenges – No premature fiscal austerity, rather more short-term stimulus is needed – … that is internationally coordinated – … and focused on job creation and investments towards medium term reforms – Bolder actions to deal with financial fragilities – More stable development financing aligned with reforms of financial system 2
  3. 3. Global recovery is slowing 5 4.1 4.0 4.0 4 3.2 3 2.6 2.8 2 1.4 UN Baseline 1 0 -1 -2 -2.3 -3 2006 2007 2008 2009 2010 2011 2012 2013 3
  4. 4. Protracted slow growth inmajor developed economies 6 4.0 4 3.0 2.9 3.1 2.6 2.2 2.0 2.0 2.0 1.9 1.7 1.5 1.6 1.5 2 0.5 -1 -0.5 -3 -3.5 -3.6 -5 -4.3 -7 -6.3 USA Japan EU15 New EU 2009 2010 2011 2012 2013 4
  5. 5. Growth is also moderating in developing countries 9.29 7.5 7.2 7.1 6.9 6.9 6.97 6.5 6.7 6.6 6.6 6.0 5.9 6.0 5.6 5.7 5.0 5.1 5.15 4.5 4.3 4.3 4.2 3.7 3.3 2.73 2.5 2.21-1 -1.0 -2.1-3 Developing Africa East Asia South Asia Western Asia Latin America countries 2009 2010 2011 2012 2013 5
  6. 6. Despite a rebound, therecovery in transitioneconomies remains fragile6 4.5 4.3 4.0 4.24 3.2 2.3 1.72 0.50-2-4 -3.7-6 -6.9-8 South-eastern Europe CIS (and Georgia) 2009 2010 2011 2012 2013 6
  7. 7. Growth is also moderating in developing countries 9.29 7.5 7.2 7.1 6.9 6.9 6.97 6.5 6.7 6.6 6.6 6.0 5.9 6.0 5.6 5.7 5.0 5.1 5.15 4.5 4.3 4.3 4.2 3.7 3.3 2.73 2.5 2.21-1 -1.0 -2.1-3 Developing Africa East Asia South Asia Western Asia Latin America countries 2009 2010 2011 2012 2013 7
  8. 8. Recovery in Latin Americafollows a decelerating trend10 2010 2011 2012 8 a/ b/ 6 4 2 0-2 WESP Projection – solid colors CEPAL Projection - shaded-4 Latin Argentina Brazil Mexico Venezuela America and C.
  9. 9. Growth pattern acrosscountries in the region isuneven
  10. 10. Less favourable externalenvironment…• World trade moderating notably• A dip in the rising trend of commodity prices, and highly volatile• Some capital inflows to emerging markets reversing and contagious rise in borrowing costs 10
  11. 11. … and major downside risksand uncertainties • Persistent high unemployment compounded by early withdrawal fiscal stimulus has increased risk of double-dip recession in developed economies • Sovereign debt distress spreading to more countries, combined with fragile banks, turbulence in financial markets • Global imbalances lingering but not urgent problem in itself for short run, but exchange rate volatility is!! 11
  12. 12. Risks for (near) double-dipglobal recession 5 4.1 4.0 4.0 4 3.2 3 2.6 2.8 2 1.4 2.2 1 Downside scenario 0.5 0 -1 -2 -2.3 -3 2006 2007 2008 2009 2010 2011 2012 2013 12
  13. 13. The downside scenario DeviationGDP growth (%) Downside scenario from baseline scenario 2011 2012 2013 2012 2013World 2.8 0.5 2.2 -2.1 -1.0Developed economies 1.3 -0.9 1.1 -2.1 -1.0United States 1.7 -0.8 1.1 -2.3 -0.9Japan -0.5 0.5 1.2 -1.5 -0.8European Union 1.6 -1.6 1.0 -2.3 -0.6Economies in transition 4.1 -2.0 3.3 -5.9 -0.9Developing economies 6.0 3.8 4.5 -1.7 -1.4Africa 2.7 3.3 3.7 -1.7 -1.5East and South Asia 7.1 5.6 5.7 -1.2 -1.2Western Asia 6.6 1.1 2.5 -2.7 -1.8Latin Am. and Carribean 4.3 0.8 2.4 -2.5 -1.8LDCs 4.9 5.4 4.0 -0.6 -1.8 13
  14. 14. Uncertainties and risks inLatin America1. Greatest risk: possible recession in Europe and the United States with strong spillover to China2. Continuing volatility with sharper falls of commodity prices3. Volatility of capital flows and exchange rates4. High exposure of commercial banks in the region (especially Spanish-owned) to sovereign debt problems in Europe5. Reduced fiscal space limiting responsiveness to renewed global downturn
  15. 15. Policy challenges1. No premature fiscal austerity, rather more short-term stimulus is needed2. … that is internationally coordinated3. … and focused on job creation and investments towards medium term reforms for sustainable development4. Bolder actions to deal with financial fragilities5. More stable development financing aligned with reforms of financial system15
  16. 16. More coordinated stimulus,not less, is needed to move outof jobs crisis 5 Policy 4.1 4.0 4.0 4.0 4 coordination 3.9 3.2 3 2.6 2.8 2 1.4 2.2 1 0.5 0 -1 -2 -2.3 -3 2006 2007 2008 2009 2010 2011 2012 2013 16
  17. 17. Faltering global economic growth United Nations, 17 January, 2012www.un.org/esa/policy
  18. 18. Hyperlinked slides 18
  19. 19. Moderating growth ofworld trade 19
  20. 20. Food and oil prices volatile…….but on the rise again FIGURE I.7 OF WESP 20
  21. 21. Volatile portfolio flows toemerging markets Equity Funds, net flows to EMEs (weekly flows in USD billions) 8 6 4 2 0 -2 Europe, ME, Africa -4 Latin America -6 Asia Global -8 10 11 11 11 1 1 1 10 10 01 01 01 1/ 5/ 1/ 3/ 20 20 /2 /2 /2 /0 /0 /1 /0 3/ 4/ 16 30 22 09 01 05 08 /1 /2 2/ 3/ 6/ 10 11 21
  22. 22. Rising borrowing costs also foremerging market economies GRAPH I.6 OF WESP 22
  23. 23. Slow post-recessionemployment recovery 23
  24. 24. Still spreading sovereign debtdistress in Europe GRAPH I.13B OF WESP 24
  25. 25. Strong volatility among majorcurrencies(NER against dollar) Figure I.10 of WESP 25
  26. 26. Reversal of strongappreciations in EMEs Figure I.11 of WESP 26
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