Pasaules ekonomikas un lielāko pasaules valstu ekonomiku attīstības prognozes, balstoties uz jaunāko Starptautiskā Valūtas fonda veikto analīzi. Aktuālie jautājumi un būtiskākie riski ekonomikas attīstībai. Ieteikumi politikas veidotājiem. Diskusija ar studentu jautājumiem un lektora atbildēm.

1. 1
RECENT TRENDS IN THE GLOBAL ECONOMY
AND THE NEAR TERM OUTLOOK
Juris Kravalis
International Relations and Communication Department
Bank of Latvia
25.01.2016

2. ABOUT US
• I represent the team of Latvijas Banka and the Eurosystem comprising economists,
experts in payments, statistics, banknotes and coins, etc.
• The economic developments and the financial system of Latvia and the euro area are
analysed at Latvijas Banka …
• .. and growth of Latvia's gross domestic product (GDP), price dynamics and labour
market development are forecasted
• The Governor of Latvijas Banka uses the above information for the decision-making of
the Governing Council of the European Central Bank..
• .. as well as for advising the Saeima (Parliament) and the government on macroeconomic
issues
• Thus, the performance of my day-to-day tasks also contributes to the price stability in
the euro area and macroeconomic stability in Latvia.

3. Where is the growth?
Source: IMF’s World Economic Outlook, April 2015

4. Growth projections have been downgraded for many countries (2014 vs 2015)
Source: IMF’s World Economic Outlook, October 2015 and October 2014
Year-over-year, percentage change

5. Global growth moderated in the first half of 2015
and is expected to gather pace in 2016
Source: IMF’s World Economic Outlook, October 2015

6. Upside risks to the global growth outlook have recently
decreased; downside risks broadly unchanged
Source: IMF’s World Economic Outlook, October 2015

7. The recovery is expected to continue in the US, supported by lower energy prices,
reduced fiscal drag, strengthened balance sheets, and an improving housing market
Source: IMF’s World Economic Outlook, October 2015 and April 2015
Upward-pressure countries are those with a residential real estate vulnerability index above the median for advanced economies (AEs)

8. The moderate euro area recovery is projected to continue in 2015–16,
sustained by lower oil prices, monetary easing, and the euro depreciation
Source: IMF’s World Economic Outlook, October 2015

9. UK are approaching a policy rate liftoff, while accommodative
monetary policy is expected to continue in euro area and Japan
Source: IMF’s World Economic Outlook, October 2015

10. However, inflation remains below central banks’ objectives;
the decline mostly reflects the fall in commodity prices
Source: IMF’s World Economic Outlook, October 2015

11. Commodity prices have declined significantly; oil prices have
fallen due to strong supply and concerns about future demand
Source: IMF’s World Economic Outlook, October 2015

12. Production of major grains and oilseeds has recently
exceeded consumption
Source: IMF’s World Economic Outlook, October 2015

13. Oil price decline is limiting U.S. shale oil production
Source: IMF’s World Economic Outlook, October 2015

14. Future contract implied oil prices have declined
significantly during 2015
Source: IMF’s World Economic Outlook, October 2015

15. Forecasting the future oil price: nearly impossible
Source: IMF’s World Economic Outlook and Fiscal Monitor, October 2015

16. Metal prices are down from post-crisis peaks; the price
of iron ore has collapsed, partly due to supply growth
Source: IMF’s World Economic Outlook, October 2015

17. China accounts for about half of the global metals
consumption (2014)
Source: IMF’s World Economic Outlook, October 2015

18. Fiscal deficits are far from being eliminated
Source: IMF’s World Economic Outlook, October 2015

19. As a result, public debt burden in major advanced
economies is at post-WWII levels
Source: IMF’s World Economic Outlook, October 2015

20. Global current account imbalances have decreased,
but are still persistent
Source: IMF’s World Economic Outlook, October 2015

21. Financial stability risks continue to rotate from
advanced countries to emerging market economies
Source: IMF’s Global Financial Stability Report, October 2015

22. Emerging market equity markets and currencies lately
have been under significant pressure
Source: IMF’s Global Financial Stability Report, October 2015

23. The decision to increase RMB flexibility was a significant surprise, and it
has spread through commodity and emerging economy currency markets
Source: IMF’s Global Financial Stability Report, October 2015

24. The inclusion of China’s yuan in the SDR has wider
economic and geopolitical implications
SDR basket from 01.01.2011 to
30.09.2016 (including)
SDR basket from 01.10.2016

25. Private exposures to Greece have been absorbed by the official sector,
mitigating volatility and limiting negative spillovers to other countries
Source: IMF’s Global Financial Stability Report, October 2015

26. Meanwhile, in the rest of euro area credit conditions are easing
as QE and banking reform begin to revive credit
Source: IMF’s Global Financial Stability Report, October 2015

27. Key near term risks going forward
• Disruptive asset price shifts and financial market turmoil
• Lower potential output
• Risks to growth in China
• Lower commodity prices
• A further sizable stregthening of the U.S. Dollar
• Geopolitical risks
• Secular stagnation and hysteresis

28. Policy recommendations
• Implement growth-enhancing structural reforms
• Pursue fiscal consolidation to bring down debt levels
• Invest in infrastructure
• Stregthen supervision and macroprudential frameworks
All countries
• Deal with crisis legacies (address NPLs, improve insolvency and foreclosure
procedures)
• Continue with monetary accommodation where output gaps are negative
and inflation too low (Euro area, Japan); ensure smooth normalization (US)
Advanced economies
• Be ready for global realignment triggering broad volatility (for currencies,
stocks, commodities, capital flows)
• Lower oil prices offer an opportunity to reform energy subsidies and
energy taxation
Emerging market and
developing economies

29. 29
COMPETITION OF STUDENT SCIENTIFIC RESEARCH PAPERS
The papers shall be submitted to:
Latvijas Banka from 16 May to 27 May
2016.
Awards:
EUR 2000 to the first-place winner;
EUR 1 250 to the two second-place
winners each;
EUR 700 to the three third-place winners
each.
Aim of the Competition: to promote the
research and analysis of the
macroeconomic issues of Latvia’s economy
as well as to facilitate students’ scientific
thinking.
Topics: a wide range of macroeconomic
topics to be discussed in the economic
context of Latvia, the Baltic States or the
euro area.

30. 30
Highlights of the recent developments in the euro
area and the Latvian economy:
www.makroekonomika.lv
• Key data and analysis
• Experts’ view
• Working papers
• Scientific Research Papers by outstanding students and the
slides of this lecture

31. 31
THANK YOU!
Discussion
Questionnaire