Global Economic Prospects, January 2014

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  • Global Outlook Presentation
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  • Global Outlook Presentation
  • Global Economic Prospects, January 2014

    1. 1. Global Economic Prospects: Coping with policy normalization in high-income countries Andrew Burns World Bank January 14, 2014 http://www.worldbank.org/globaloutlook 1
    2. 2. Fourth quarter manufacturing suggests continued strengthen in US and Japan, weakness elsewhere Manufacturing output growth, 3m/3m saar Q4 15 Japan 10 United States 5 0 Other high-income -5 Euro Area -10 -15 Jan '12 Source: World Bank, Datastream. Jul '12 Jan '13 Jul '13
    3. 3. Fourth quarter manufacturing suggests continued strengthen in US and Japan, weakness elsewhere Manufacturing output growth, 3m/3m saar Q4 15 Japan 10 United States 5 0 Other high-income -5 Euro Area -10 -15 Jan '12 Source: World Bank, Datastream. Jul '12 Jan '13 Jul '13
    4. 4. Fourth quarter manufacturing suggests continued strengthen in US and Japan, weakness elsewhere Manufacturing output growth, 3m/3m saar Q4 15 10 Japan United States 5 0 Other high-income -5 Euro Area -10 -15 Jan '12 Source: World Bank, Datastream. Jul '12 Jan '13 Jul '13
    5. 5. Fourth quarter manufacturing suggests continued strengthen in US and Japan, weakness elsewhere Manufacturing output growth, 3m/3m saar Q4 15 10 Japan United States 5 0 Other high-income -5 Euro Area -10 -15 Jan '12 Source: World Bank, Datastream. Jul '12 Jan '13 Jul '13
    6. 6. Growth firming or solid in most developing countries Industrial production growth, 3m/3m saar 20 15 China 10 Other developing India 5 0 -5 -10 -15 Jan '11 Jul '11 Source: World Bank, Datastream. Jan '12 Jul '12 Jan '13 Jul '13 6
    7. 7. Growth firming or solid in most developing countries Industrial production growth, 3m/3m saar 20 15 China 10 Other developing India 5 0 -5 -10 -15 Jan '11 Jul '11 Source: World Bank, Datastream. Jan '12 Jul '12 Jan '13 Jul '13 7
    8. 8. Global GDP growth is projected to: 8
    9. 9. Global GDP growth is projected to: • firm from 2.4% in 2013 to 3.2% this year, 9
    10. 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 10
    11. 11. A gradual pick up in growth, led by high-income countries Percent annual GDP growth 10 Middle Income 8 Low Income 6 4 World High Income 2 0 -2 -4 2000 2002 Source: World Bank. 2004 2006 2008 2010 2012 2014 2016
    12. 12. A gradual pick up in growth, led by high-income countries Percent annual GDP growth 10 Middle Income 8 Low Income 6 4 World High Income 2 0 -2 -4 2000 2002 Source: World Bank. 2004 2006 2008 2010 2012 2014 2016
    13. 13. A gradual pick up in growth, led by high-income countries Percent annual GDP growth 10 Middle Income 8 Low Income 6 4 World High Income 2 0 -2 -4 2000 2002 Source: World Bank. 2004 2006 2008 2010 2012 2014 2016
    14. 14. A gradual pick up in growth, led by high-income countries Percent annual GDP growth 10 Middle Income 8 Low Income 6 4 World High Income 2 0 -2 -4 2000 2002 Source: World Bank. 2004 2006 2008 2010 2012 2014 2016
    15. 15. A gradual pick up in growth, led by high-income countries Percent annual GDP growth 10 Middle Income 8 Low Income 6 4 World High Income 2 0 -2 -4 2000 2002 Source: World Bank. 2004 2006 2008 2010 2012 2014 2016
    16. 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 . 16
    17. 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 . 17
    18. 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 . 18
    19. 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 . 19
    20. 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 . 20
    21. 21. Slower developing country growth is mainly a cyclical phenomenon GDP and potential GDP, annual growth rate 10 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 Potential + Cyclical GDP growth Potential GDP growth 9 8 7 6 5 4 3 2 1 0 Period of gradual acceleration in potential 1990 1995 Source: World Bank. 2000 Boom Period 2005 Growth slower only relative to boom 2010 2015 21
    22. 22. Slower developing country growth is mainly a cyclical phenomenon GDP and potential GDP, annual growth rate 10 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 Potential + Cyclical GDP growth Potential GDP growth 9 8 7 6 5 4 3 2 1 0 Period of gradual acceleration in potential 1990 1995 Source: World Bank. 2000 Boom Period 2005 Growth slower only relative to boom 2010 2015 22
    23. 23. Slower developing country growth is mainly a cyclical phenomenon GDP and potential GDP, annual growth rate 10 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 Potential + Cyclical GDP growth Potential GDP growth 9 8 7 6 5 4 3 2 1 0 Period of gradual acceleration in potential 1990 1995 Source: World Bank. 2000 Boom Period 2005 Growth slower only relative to boom 2010 2015 23
    24. 24. Doing better going forward will require focusing on: 24
    25. 25. Doing better going forward will require focusing on: • structural policies: investment in education, infrastructure and health. 25
    26. 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 26
    27. 27. Growth acceleration to be limited in regions that have already fully recovered Percent annual GDP growth 8 2012 7 2013 2014 2015 2016 6 5 4 3 2 1 0 East Asia & Pacific Europe & Central Asia Latin America & Caribbean & North Africa Middle-East South Asia Sub-Saharan Africa Source: World Bank. 27
    28. 28. Growth acceleration to be limited in regions that have already fully recovered Percent annual GDP growth 8 2012 7 2013 2014 2015 2016 6 5 4 3 2 1 0 East Asia & Pacific Europe & Central Asia Latin America & Caribbean & North Africa Middle-East South Asia Sub-Saharan Africa Source: World Bank. 28
    29. 29. Growth acceleration to be limited in regions that have already fully recovered Percent annual GDP growth 8 2012 7 2013 2014 2015 2016 6 5 4 3 2 1 0 East Asia & Pacific Europe & Central Asia Latin America & Caribbean & North Africa Middle-East South Asia Sub-Saharan Africa Source: World Bank. 29
    30. 30. Growth acceleration to be limited in regions that have already fully recovered Percent annual GDP growth 8 2012 7 2013 2014 2015 2016 6 5 4 3 2 1 0 East Asia & Pacific Europe & Central Asia Latin America & Caribbean & North Africa Middle-East South Asia Sub-Saharan Africa Source: World Bank. 30
    31. 31. Growth acceleration to be limited in regions that have already fully recovered Percent annual GDP growth 8 2012 7 2013 2014 2015 2016 6 5 4 3 2 1 0 East Asia & Pacific Europe & Central Asia Latin America & Caribbean & North Africa Middle-East South Asia Sub-Saharan Africa Source: World Bank. 31
    32. 32. Growth acceleration to be limited in regions that have already fully recovered Percent annual GDP growth 8 2012 7 2013 2014 2015 2016 6 5 4 3 2 1 0 East Asia & Pacific Europe & Central Asia Latin America & Caribbean & North Africa Middle-East South Asia Sub-Saharan Africa Source: World Bank. 32
    33. 33. Growth acceleration to be limited in regions that have already fully recovered Percent annual GDP growth 8 2012 7 2013 2014 2015 2016 6 5 4 3 2 1 0 East Asia & Pacific Europe & Central Asia Latin America & Caribbean & North Africa Middle-East South Asia Sub-Saharan Africa Source: World Bank. 33
    34. 34. Growth acceleration to be limited in regions that have already fully recovered Percent annual GDP growth 8 2012 7 2013 2014 2015 2016 6 5 4 3 2 1 0 East Asia & Pacific Europe & Central Asia Latin America & Caribbean & North Africa Middle-East South Asia Sub-Saharan Africa Source: World Bank. 34
    35. 35. Growth acceleration to be limited in regions that have already fully recovered Percent annual GDP growth 8 2012 7 2013 2014 2015 2016 6 5 4 3 2 1 0 East Asia & Pacific Europe & Central Asia Latin America & Caribbean & North Africa Middle-East South Asia Sub-Saharan Africa Source: World Bank. 35
    36. 36. The strengthening recovery in highincome countries is most welcome, but it brings with it risks of disruption as monetary policy tightens. 36
    37. 37. In a smooth adjustment scenario, capital flows to developing countries will ease only marginally % of developing country GDP 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 10Q1 Source: World Bank. 13Q1 16Q1 37
    38. 38. In a smooth adjustment scenario, capital flows to developing countries will ease only marginally % of developing country GDP 9.0 Smooth adjustment scenario : capital flows decline from 4.6% of developing country GDP in 2013 to 4.0 percent in 2016 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 10Q1 Source: World Bank. 13Q1 16Q1 38
    39. 39. In a smooth adjustment scenario, capital flows to developing countries will ease only marginally % of developing country GDP 9.0 Smooth adjustment scenario : capital flows decline from 4.6% of developing country GDP in 2013 to 4.0% in 2016 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 10Q1 Source: World Bank. 13Q1 16Q1 39
    40. 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. 40
    41. 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. 41
    42. 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. 42
    43. 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. 43
    44. 44. While unlikely a sharp market reaction to tapering could cut deeply into capital flows for a short period 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 10Q1 Source: World Bank. 13Q1 16Q1 44
    45. 45. While unlikely a sharp market reaction to tapering could cut deeply into capital flows for a short period 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 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 10Q1 Source: World Bank. 13Q1 16Q1 45
    46. 46. While unlikely a sharp market reaction to tapering could cut deeply into capital flows for a short period 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 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 10Q1 Source: World Bank. 13Q1 16Q1 46
    47. 47. While unlikely a sharp market reaction to tapering could cut deeply into capital flows for a short period 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 8.0 A 200 bp rise could cause capital flows to decline by 80 percent 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 10Q1 Source: World Bank. 13Q1 16Q1 47
    48. 48. Earlier rapid increase in credit increases the risk of banking-sector crises Level of banking-sector net credits in 2012, % of GDP Change in net bank credits, 2012-2007 (% of GDP) 40 180 35 160 30 140 120 25 100 20 80 15 60 Source: World Bank, IMF. Brazil Kosovo Romania Malawi Lao PDR Paraguay Cambo… Lesotho Venezu… Turkey Gambia Morocco Malaysia Vietnam Vanuatu St. Lucia China - Serbia - Armenia 20 Botswa… 5 Bhutan 40 Thailand 10 48
    49. 49. Earlier rapid increase in credit increases the risk of banking-sector crises Level of banking-sector net credits in 2012, % of GDP Change in net bank credits, 2012-2007 (% of GDP) 40 180 35 Change in Credit level 160 30 Credit levels in 2012 140 120 25 100 20 80 15 60 Source: World Bank, IMF. Brazil Kosovo Romania Malawi Lao PDR Paraguay Cambo… Lesotho Venezu… Turkey Gambia Morocco Malaysia Vietnam Vanuatu St. Lucia China - Serbia - Armenia 20 Botswa… 5 Bhutan 40 Thailand 10 49
    50. 50. Earlier rapid increase in credit increases the risk of banking-sector crises Level of banking-sector net credits in 2012, % of GDP Change in net bank credits, 2012-2007 (% of GDP) 40 180 35 Change in Credit level 160 30 Credit levels in 2012 140 120 25 100 20 80 15 60 Source: World Bank, IMF. Brazil Kosovo Romania Malawi Lao PDR Paraguay Cambo… Lesotho Venezu… Turkey Gambia Morocco Malaysia Vietnam Vanuatu St. Lucia China - Serbia - Armenia 20 Botswa… 5 Bhutan 40 Thailand 10 50
    51. 51. Policy makers need to give thought now to how they would respond to a significant tightening of global financing conditions. 51
    52. 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. 52
    53. 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. 53
    54. 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. 54
    55. 55. By improving the longer term outlook, credible reform agendas can go a long way towards boosting investor and market confidence. 55
    56. 56. Global Economic Prospects: Coping with policy normalization in high-income countries Andrew Burns World Bank January 14, 2014 http://www.worldbank.org/globaloutlook 56

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