Russian
(pdf)
World Economic
Outlook Update
Is the Tide
Rising?
January
2014
www.imf.org/weo
|
|
Download
full text (PDF)
Global activity strengthened during the second half
of 2013, as anticipated in the October 2013 World Economic Outlook (WEO).
Activity is expected to improve further in 2014–15, largely on account of
recovery in the advanced economies. Global growth is now projected to be
slightly higher in 2014, at around 3.7 percent, rising to 3.9 percent in
2015, a broadly unchanged outlook from the October 2013 WEO. But downward
revisions to growth forecasts in some economies highlight continued
fragilities, and downside risks remain. In advanced economies, output gaps
generally remain large and, given the risks, the monetary policy stance
should stay accommodative while fiscal consolidation continues. In many
emerging market and developing economies, stronger external demand from
advanced economies will lift growth, although domestic weaknesses remain a
concern. Some economies may have room for monetary policy support. In many
others, output is close to potential, suggesting that growth declines partly
reflect structural factors or a cyclical cooling and that the main policy
approach for raising growth must be to push ahead with structural reform. In
some economies, there is a need to manage vulnerabilities associated with
weakening credit quality and larger capital outflows.
Is the Tide Rising?
Global activity and world trade picked up in the second half of 2013.
Recent data even suggest that global growth during this period was somewhat
stronger than anticipated in the October 2013 WEO. Final demand in advanced
economies expanded broadly as expected—much of the upward surprise in growth
is due to higher inventory demand. In emerging market economies, an export
rebound was the main driver behind better activity, while domestic demand
generally remained subdued, except in China.
Financial conditions in advanced economies have eased since the release
of the October 2013 WEO—with little change since the announcement by the
U.S. Federal Reserve on December 18 that it will begin tapering its
quantitative easing measures this month. This includes further declines in
risk premiums on government debt of crisis-hit euro area economies. In
emerging market economies, however, financial conditions have remained
tighter following the surprise U.S. tapering announcements in May 2013,
notwithstanding fairly resilient capital flows. Equity prices have not fully
recovered, many sovereign bond yields have edged up, and some currencies
have been under pressure.
Turning to projections, growth in the United States is
expected to be 2.8 percent in 2014, up from 1.9 percent in 2013. Following
upward surprises to inventories in the second half of 2013, the pickup in
2014 will be carried by final domestic demand, supported in part by a
reduction in the fiscal drag as a result of the recent budget agreement. But
the latter also implies a tighter projected fiscal stance in 2015 (as the
recent budget agreement implies that most of the sequester cuts will remain
in place in FY2015, instead of being reversed as assumed in the October 2013
WEO), and growth is now projected at 3 percent for 2015 (3.4 percent in
October 2013).
The euro area is turning the corner from recession to recovery.
Growth is projected to strengthen to 1 percent in 2014 and 1.4 percent in
2015, but the recovery will be uneven. The pickup will generally be more
modest in economies under stress, despite some upward revisions including
Spain. High debt, both public and private, and financial fragmentation will
hold back domestic demand, while exports should further contribute to
growth. Elsewhere in Europe, activity in the United Kingdom has been
buoyed by easier credit conditions and increased confidence. Growth is
expected to average 2¼ percent in 2014–15, but economic slack will remain
high.
Download the
data for Figure 1 (csv file).
|
|
Table 1. Overview of the World Economic Outlook
Projections
(Percent change unless noted otherwise) |
|
|
Year over Year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Difference from October 2013 WEO Published |
|
Q4 over Q4 |
|
|
|
Projections |
|
|
Estimates |
Projections |
|
2012 |
2013 |
2014 |
2015 |
|
2014 |
2015 |
|
2013 |
2014 |
2015 |
World Output 1/ |
3.1 |
3.0 |
3.7 |
3.9 |
|
0.1 |
0.0 |
|
3.3 |
3.6 |
3.8 |
Advanced Economies |
1.4 |
1.3 |
2.2 |
2.3 |
|
0.2 |
–0.2 |
|
2.0 |
2.1 |
2.3 |
United States |
2.8 |
1.9 |
2.8 |
3.0 |
|
0.2 |
–0.4 |
|
2.5 |
2.8 |
3.0 |
Euro Area |
–0.7 |
–0.4 |
1.0 |
1.4 |
|
0.1 |
0.1 |
|
0.5 |
1.2 |
1.5 |
Germany |
0.9 |
0.5 |
1.6 |
1.4 |
|
0.2 |
0.1 |
|
1.6 |
1.3 |
1.4 |
France |
0.0 |
0.2 |
0.9 |
1.5 |
|
0.0 |
0.0 |
|
0.6 |
1.2 |
1.6 |
Italy |
–2.5 |
–1.8 |
0.6 |
1.1 |
|
–0.1 |
0.1 |
|
–0.8 |
1.0 |
1.2 |
Spain |
–1.6 |
–1.2 |
0.6 |
0.8 |
|
0.4 |
0.3 |
|
–0.2 |
0.7 |
0.9 |
Japan |
1.4 |
1.7 |
1.7 |
1.0 |
|
0.4 |
–0.2 |
|
3.1 |
0.9 |
0.6 |
United Kingdom |
0.3 |
1.7 |
2.4 |
2.2 |
|
0.6 |
0.2 |
|
2.3 |
2.7 |
1.8 |
Canada |
1.7 |
1.7 |
2.2 |
2.4 |
|
0.1 |
–0.1 |
|
2.2 |
2.3 |
2.4 |
Other Advanced Economies |
1.9 |
2.2 |
3.0 |
3.2 |
|
–0.1 |
–0.1 |
|
2.7 |
2.9 |
3.4 |
Emerging Market and
Developing Economies 1/ |
4.9 |
4.7 |
5.1 |
5.4 |
|
0.0 |
0.1 |
|
4.8 |
5.4 |
5.6 |
Central and Eastern Europe |
1.4 |
2.5 |
2.8 |
3.1 |
|
0.1 |
–0.2 |
|
2.9 |
3.7 |
2.8 |
Commonwealth of Independent States |
3.4 |
2.1 |
2.6 |
3.1 |
|
–0.8 |
–0.7 |
|
2.2 |
1.4 |
3.1 |
Russia |
3.4 |
1.5 |
2.0 |
2.5 |
|
–1.0 |
–1.0 |
|
1.9 |
1.5 |
3.2 |
Excluding Russia |
3.3 |
3.5 |
4.0 |
4.3 |
|
–0.1 |
–0.1 |
|
. . . |
. .
. |
. .
. |
Developing Asia |
6.4 |
6.5 |
6.7 |
6.8 |
|
0.2 |
0.2 |
|
6.4 |
6.8 |
7.0 |
China |
7.7 |
7.7 |
7.5 |
7.3 |
|
0.3 |
0.2 |
|
7.8 |
7.6 |
7.3 |
India 2/ |
3.2 |
4.4 |
5.4 |
6.4 |
|
0.2 |
0.1 |
|
4.6 |
5.5 |
7.0 |
ASEAN-5 3/ |
6.2 |
5.0 |
5.1 |
5.6 |
|
–0.3 |
0.0 |
|
4.0 |
5.6 |
5.6 |
Latin America and the Caribbean |
3.0 |
2.6 |
3.0 |
3.3 |
|
–0.1 |
–0.2 |
|
1.6 |
3.4 |
2.8 |
Brazil |
1.0 |
2.3 |
2.3 |
2.8 |
|
–0.2 |
–0.4 |
|
1.9 |
2.6 |
3.0 |
Mexico |
3.7 |
1.2 |
3.0 |
3.5 |
|
0.0 |
0.0 |
|
0.4 |
4.2 |
3.3 |
Middle East, North Africa,
Afghanistan, and Pakistan |
4.1 |
2.4 |
3.3 |
4.8 |
|
–0.3 |
0.7 |
|
. . . |
. .
. |
. .
. |
Sub-Saharan Africa |
4.8 |
5.1 |
6.1 |
5.8 |
|
0.1 |
0.1 |
|
. . . |
. .
. |
. .
. |
South Africa |
2.5 |
1.8 |
2.8 |
3.3 |
|
–0.1 |
0.0 |
|
1.9 |
3.2 |
3.3 |
Memorandum |
|
|
|
|
|
|
|
|
|
|
|
World Growth Based on Market
Exchange Rates |
2.5 |
2.4 |
3.1 |
3.4 |
|
0.1 |
–0.1 |
|
2.8 |
3.0 |
3.2 |
World Trade Volume (goods
and services) |
2.7 |
2.7 |
4.5 |
5.2 |
|
–0.5 |
–0.3 |
|
. . . |
. . . |
. . . |
Imports (goods and services) |
|
|
|
|
|
|
|
|
|
|
|
Advanced Economies |
1.0 |
1.4 |
3.4 |
4.1 |
|
–0.7 |
–0.5 |
|
. . . |
. .
. |
. .
. |
Emerging Market and Developing
Economies |
5.7 |
5.3 |
5.9 |
6.5 |
|
0.0 |
–0.2 |
|
. . . |
. .
. |
. .
. |
Commodity Prices (U.S.
dollars) |
|
|
|
|
|
|
|
|
|
|
|
Oil 4/ |
1.0 |
–0.9 |
–0.3 |
–5.2 |
|
2.8 |
0.8 |
|
2.7 |
–2.7 |
–5.3 |
Nonfuel (average based on world
commodity export weights) |
–10.0 |
–1.5 |
–6.1 |
–2.4 |
|
–2.0 |
–0.3 |
|
–3.8 |
–4.6 |
–1.8 |
Consumer Prices |
|
|
|
|
|
|
|
|
|
|
|
Advanced Economies |
2.0 |
1.4 |
1.7 |
1.8 |
|
–0.1 |
0.0 |
|
1.3 |
1.9 |
1.7 |
Emerging Market and Developing
Economies 1/ |
6.0 |
6.1 |
5.6 |
5.3 |
|
0.0 |
0.1 |
|
5.7 |
5.1 |
4.8 |
London Interbank Offered
Rate (percent) |
|
|
|
|
|
|
|
|
|
|
|
On U.S. Dollar Deposits (6 month) |
0.7 |
0.4 |
0.4 |
0.6 |
|
–0.2 |
–0.3 |
|
. . . |
. .
. |
. .
. |
On Euro Deposits (3 month) |
0.6 |
0.2 |
0.3 |
0.5 |
|
–0.2 |
–0.4 |
|
. . . |
. .
. |
. .
. |
On Japanese Yen Deposits (6 month) |
0.3 |
0.3 |
0.2 |
0.2 |
|
0.0 |
–0.2 |
|
. . . |
. .
. |
. .
. |
|
Note:
Real effective exchange rates are assumed to remain constant at the
levels prevailing during November 11–December 9, 2013. When
economies are not listed alphabetically, they are ordered on the
basis of economic size. The aggregated quarterly data are seasonally
adjusted.
1/ The quarterly data and projections account for 90 percent of the
world ppp weights and around 80 percent of the emerging market and
developing economies.
2/ For India, data and forecasts are presented on a fiscal year
basis and output growth is based on GDP at market prices.
Corresponding growth forecasts for GDP at factor cost are 4.6, 5.4,
and 6.4 percent for 2013, 2014, and 2015, respectively.
3/ Indonesia, Malaysia, Philippines, Thailand, and Vietnam.
4/ Simple average of prices of U.K. Brent, Dubai Fateh, and West
Texas Intermediate crude oil. The average price of oil in U.S.
dollars a barrel was $104.11 in 2013; the assumed price based on
futures markets is $103.84 in 2014 and $98.47 in 2015. |
In Japan, growth is now expected to slow more gradually compared
with October 2013 WEO projections. Temporary fiscal stimulus should partly
offset the drag from the consumption tax increase in early 2014. As a
result, annual growth is expected to remain broadly unchanged at 1.7 percent
in 2014, given carryover effects, before moderating to 1 percent in 2015.
Overall, growth in emerging market and developing economies is
expected to increase to 5.1 percent in 2014 and to 5.4 percent in 2015.
Growth in China rebounded strongly in the second half of 2013, due
largely to an acceleration in investment. This surge is expected to be
temporary, in part because of policy measures aimed at slowing credit growth
and raising the cost of capital. Growth is thus expected to moderate
slightly to around 7½ percent in 2014–15. Growth in India picked up
after a favorable monsoon season and higher export growth and is expected to
firm further on stronger structural policies supporting investment. Many
other emerging market and developing economies have started to benefit from
stronger external demand in advanced economies and China. In many, however,
domestic demand has remained weaker than expected. This reflects to varying
degrees, tighter financial conditions and policy stances since mid-2013, as
well as policy or political uncertainty and bottlenecks, with the latter
weighing on investment in particular. As a result, growth in 2013 or 2014
has been revised downward compared to the October 2013 WEO forecasts,
including in Brazil and Russia. Downward revisions to growth in 2014 in the
Middle East and North Africa region, and upward revisions in 2015, mainly
reflect expectations that the rebound in oil output in Libya after outages
in 2013 will proceed at a slower pace.
In sum, global growth is projected to increase from 3 percent in
2013 to 3.7 percent in 2014 and 3.9 percent in 2015.
Download the
data for Figure 2 (csv file).
Not yet out of the woods
Turning to risks to the forecast, downside risks—old ones
discussed in the October 2013 WEO and new ones—remain. Among new ones, risks
to activity associated with very low inflation in advanced economies,
especially the euro area, have come to the fore. With inflation likely to
remain below target for some time, longer-term inflation expectations might
drift down. This raises the risks of lower-than-expected inflation, which
increases real debt burdens, and of premature real interest rate increases,
as monetary policy is constrained in lowering nominal interest rates. It
also raises the likelihood of deflation in the event of adverse shocks to
activity.
Downside risks to financial stability persist. Corporate leverage has
risen, accompanied in many emerging market economies by increased exposures
to foreign currency liabilities. In a number of markets, including several
emerging markets, asset valuations could come under pressure if interest
rates rose more than expected and adversely affected investor sentiment.
In emerging market economies, increased financial market and
capital flow volatility remain a concern given that the Fed will start
tapering in early 2014. The responses to the related December announcement
have been relatively muted in most economies, possibly helped by the Fed’s
policy communication and re-calibration (including revisions to forward
guidance). Nevertheless, portfolio shifts and some capital outflows are
likely with Fed tapering. When combined with domestic weaknesses, the result
could be sharper capital outflows and exchange rate adjustments.
Turning to policies, ensuring robust growth and managing vulnerabilities
remain global priorities despite the expected strengthening of activity.
In advanced economies, policy priorities remain broadly those
discussed in the October 2013 WEO. With prospects improving, however, it
will be critical to avoid a premature withdrawal of monetary policy
accommodation, including in the United States, as output gaps are still
large while inflation is low and fiscal consolidation continues. Stronger
growth is needed to complete balance sheet repair after the crisis and to
lower related legacy risks. In the euro area, the European Central Bank (ECB)
will need to consider additional measures toward this end. Measures such as
longer-term liquidity provision, including targeted lending, would
strengthen demand and reduce financial market fragmentation. Repairing bank
balance sheets through the Balance Sheet Assessment exercise and
recapitalizing weak banks and completing the Banking Union by unifying both
supervision and crisis resolution will be essential for confidence to
improve, for credit to revive, and to sever the link between sovereigns and
banks. More structural reforms are needed to lift investment and prospects.
In emerging market and developing economies, recent developments
highlight the need to manage the risks of potential capital flow reversals.
Economies with domestic weaknesses and partly related external current
account deficits appear particularly exposed. Exchange rates should be
allowed to depreciate in response to deteriorating external funding
conditions. When there are constraints on exchange rate adjustment —because
of balance sheet mismatches and other financial fragilities, or large
pass-through to inflation because of monetary policy frameworks that lack
transparency or consistency in their implementation— policymakers might need
to consider a combination of tightening macroeconomic policies and stronger
regulatory and supervisory policy efforts. In China, the recent rebound
highlights that investment remains the key driver in growth dynamics. More
progress is required on rebalancing domestic demand from investment to
consumption to effectively contain the risks to growth and financial
stability from overinvestment.
Source |