global economic outlook
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Global Economic OutlookThe Great Recession and Recovery
Stephan S. Thurman, PhDBureau for Economic, Energy, and Business Affairs
for Wichita State University, October 2010
Disclaimer
1
The State Department does not generate or publish a global economic outlook. The information contained in the slides below is generated from organizations or companies whose data are in the public domain, and to which the State Department has access.
The Great Recession – Deepest in 30 Years
1
0.9
2.3
-0.6
-2
0
2
4
6
World GDP Growth 1980-2009 (% p.a.)
Source: IMF World Economic Outlook April 2010
Average (excl. recessions) = 3.5%
The Great Recession – Trade Transmission
2
-1.1
0.2
-10.7-12
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
World Trade Growth 1980-2009 (% p.a.)
Source: IMF World Economic Outlook April 2010
Average (excl. recessions) = 6.3%
Great Recession: Did We See it Coming?
3
-8
-6
-4
-2
0
2
4
6
8
10
United States 2009 European Union 2009
Japan 2009 China 2009 Other Advanced Economies 2009
Emerging and Developing
Economies 2009
IMF WEO Forecasts of GDP Growth for 2009 (%), April 08-April 10
April
08O
ct 08
April
09O
ct 09
April
10
Source: IMF World Economic Outlook, April and October 2008-10
The ‘Great’ Recovery – Trade Returns
4
-1.1
0.2
-10.7-12
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
World Trade Growth 1980-2011 (% p.a.)
Source: IMF World Economic Outlook April 2010
Average (excl. recessions) = 6.3%
The ‘Great’ Recovery …is a “V” …We Hope
5
0.9
2.3
-0.6
-2
0
2
4
6
World GDP Growth 1980-2011 (% p.a.)
Source: IMF World Economic Outlook April 2010
Average (excl. recessions) = 3.53%
July 2010 IMF WEO Update
6
Selected Country GDP Outlook
7
-8
-6
-4
-2
0
2
4
6
8
10
12
14
United States Canada Mexico EU Japan China
-2.4 -2.6
-6.5
-4.1
-5.2
8.73.
1
3.1 4.
2
1.0 1.9
10.0
2.6 3.
2 4.5
1.8
2.0
9.9
GDP Growth Rates (%ch, annual rate)20
0620
0720
0820
0920
10F
2011
F
Source: IMF World Economic Outlook April 2010
Selected Country Inflation Outlook
8
-2
-1
0
1
2
3
4
5
6
United States Canada Mexico EU Japan China
-0.3
0.3
5.3
0.9
-1.4
-0.7
2.1
1.8
4.6
1.5
-1.4
3.1
1.7 2.
0
3.7
1.5
-0.5
2.4
Consumer Price Inflation (%ch, annual rate)20
0620
0720
0820
0920
10F
2011
F
Source: IMF World Economic Outlook April 2010
Selected Country Current Accounts
9
-1000
-800
-600
-400
-200
0
200
400
600
United States Canada Mexico EU Japan China
-418.0
-36.1-5.2
-49.8
141.7
283.8-4
87.2
-40.
0
-11.
2
-34.
3
149.
7
334.
7
-523
.9
-40.
5
-14.
7
-21.
1
131.
1
391.
0
Current Account Balance ($ Bil.)20
0620
0720
0820
0920
10F
2011
F
Source: IMF World Economic Outlook April 2010
Risks to the Great Recovery-- UNCERTAINTY --
10
1. The “New Normal” – sluggish growth and little or no employment growth.
2. Sovereign Debt – the European periphery to besure, but other Advanced Economies?
3. Further Stimulus or Consolidation? – when toexit? – too early=renewed recession & too late=unsustainable debt load
4. Deflation – that combination of low or negativeGDP growth accompanied by negative inflation -- present in Japan – “not likely” in U.S. or EU
Policy Focus of the G20Washington, London, Pittsburg,
Toronto ….and next month, Seoul, Korea
11
1. Return to Growth with Quality Jobs2. Reform and Strengthen Financial Systems 3. Complete Reforms of the International Financial
Institutions4. Create Strong, Sustainable and Balanced Global
Growth
G20 Trade Surpluses Get Smaller,,,,
12
-$1.0
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0Brazil Trade Balance ($ billions)
Source: EIU
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
$14.0
$16.0
$18.0
$20.0Russia Trade Balance ($ billions)
Source: EIU
-$20.0
-$10.0
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0 China Trade Balance ($ billions)
Source: EIU
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0 Germany Trade Balance ($ billions)
Source: EIU
-$15.0
-$10.0
-$5.0
$0.0
$5.0
$10.0
$15.0
$20.0 Japan Trade Balance ($ billions)
Source: EIU
G20Trade Surplus
Countries
….while G20 Trade Deficits Shrink
13
G20Trade Deficit
Countries
-$18.0
-$16.0
-$14.0
-$12.0
-$10.0
-$8.0
-$6.0
-$4.0
-$2.0
$0.0
$2.0
India Trade Balance ($ billions)
Source: EIU
-$12.0
-$10.0
-$8.0
-$6.0
-$4.0
-$2.0
$0.0
$2.0
$4.0 France Trade Balance ($ billions)
Source: EIU
-$2.0
-$1.0
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
Canada Trade Balance ($ billions)
Source: EIU
-$18.0
-$16.0
-$14.0
-$12.0
-$10.0
-$8.0
-$6.0
-$4.0
-$2.0
$0.0 UK Trade Balance ($ billions)
Source: EIU
-$80.0
-$70.0
-$60.0
-$50.0
-$40.0
-$30.0
-$20.0
-$10.0
$0.0 US Trade Balance ($ billions)
Source: EIU
14
No Significant Global Imbalances
-$1,000
-$800
-$600
-$400
-$200
$0
$200
$400
$600
$800
2.32 0.29
Global Current Account Imbalances 1980 ($ bil.)
Source: IMF WEO via ESDB
Deficits Surpluses
Source: IMF WEO via ESDB
Deficits Surpluses
15
Global Imbalances Emerge
-$1,000
-$800
-$600
-$400
-$200
$0
$200
$400
$600
$800
-417.43
20.52
Global Current Account Imbalances 1998 ($ bil.)
Source: IMF WEO via ESDB
Deficits Surpluses
Source: IMF WEO via ESDB
Deficits Surpluses
16
Global Imbalances Peak
-$1,000
-$800
-$600
-$400
-$200
$0
$200
$400
$600
$800
-856.7
238.5
Global Current Account Imbalances 2006 ($ bil.)
Source: IMF WEO via ESDB
Deficits Surpluses
17
Global Imbalances Shrink With Recession
-$1,000
-$800
-$600
-$400
-$200
$0
$200
$400
$600
$800
-418.0
283.8
Global Current Account Imbalances 2009 ($ bil.)
Source: IMF WEO via ESDB
Deficits Surpluses
18
Global Imbalances Re-Emerge with Recovery
-$1,000
-$800
-$600
-$400
-$200
$0
$200
$400
$600
$800
-638.2
759.5
Global Current Account Imbalances 2015 ($ bil.)
Source: IMF WEO via ESDB
Deficits Surpluses
Three Sources of Savings
19
Private Savings +
Govt. Savings+
Foreign Savings== 0
Disposable IncomeLess
ConsumptionLess
Investment---------------------------Taxes Less Revenues
----------------------------
Imports Less Exports
G20 Policy Recommendations
20
•Making more progress on rebalancing global demand •Advanced deficit countries should take actions to boost national savings while maintaining open markets and enhancing export competitiveness. • Surplus economies will undertake reforms to reduce their reliance on external demand and focus more on domestic sources of growth.
•Strengthening social safety nets, enhancing corporate governance reform, financial market development, infrastructure spending, and greater exchange rate flexibility in some emerging markets.
National Export InitiativeDouble Exports in 5 Years
21
@2010-II$1,817.9 bil.
@2015Q2$3,635.8 bil.
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2000
-I
2000
-III
2001
-I
2001
-III
2002
-I
2002
-III
2003
-I
2003
-III
2004
-I
2004
-III
2005
-I
2005
-III
2006
-I
2006
-III
2007
-I
2007
-III
2008
-I
2008
-III
2009
-I
2009
-III
2010
-I
2010
-III
2011
-I
2011
-III
2012
-I
2012
-III
2013
-I
2013
-III
2014
-I
2014
-III
2015
-I
NEI Target = Double Nominal $ Exports ($ bil.)
Source: Department of Commerce BEA
Average Growth Rate Needed to Reach NEI
= 14.9% p.a.