Press Release No. 08/236
The International Monetary Fund (IMF) today warned that the world economy is experiencing a major downturn in the face of the most dangerous financial shock in mature markets since the 1930s, and called for strong and coordinated actions to avoid worse-case scenarios. The IMF's latest World Economic Outlook (WEO) projects global growth to slow substantially in the latter part of 2008, before beginning a modest recovery in the second half of 2009. Growth in advanced countries will be close to zero until at least the middle of 2009, while growth in emerging and developing countries will slow to substantially lower rates than in the recent past. The WEO projects global growth at around 3 percent in 2009.
"The world economy has entered a major downturn after being hit by two very large shocks: a surge in oil and commodity prices and the expanding financial crisis," said Olivier Blanchard, the IMF's Economic Counsellor and Director of Research. "The financial crisis has clearly gotten worse, and no country will be fully immune from the effects on the real economy. It is too late to avoid a slowdown, but strong and coordinated policies can avoid even worse scenarios. In many countries, plans are already being put in place to help resolve the crisis."
The recovery measures include both financial and macroeconomic policies, Mr. Blanchard noted. "While uncertainty remains, we are hopeful that these measures will contain the crisis and return trust to the markets," he said. "Restored trust should result in credit coming back—although it will come back only slowly."
He said in the short run, systemic financial actions—from the provision of liquidity to the purchase of assets to the injection of capital, are key to restoring stability and confidence in financial markets, while monetary and fiscal policies in many countries can help soften the effects of decreasing demand and break the negative feedback loop between the financial sector and the real economy. "With such policies in place, it is reasonable to expect recovery to start in 2009 and gather strength in 2010," Mr. Blanchard said.
The WEO projects global growth year on year will slow sharply to 3.9 percent in 2008 from 5.0 percent in 2007, and continue slowing to 3.0 percent in 2009 (see Annex for 2008-2009 forecasts). "The advanced economies are close to recession, and the recovery in 2009 will be exceptionally gradual by past standards," Mr. Blanchard said.
The U.S. economy is slowing after a relatively strong second quarter, as support from fiscal stimulus has ebbed and the impact of the U.S. credit crisis is intensifying, according to the WEO, which estimates the U.S. will record year-on-year growth of 1.6 percent in 2008 and 0.1 percent in 2009 against 2.0 percent in 2007. A turnaround in the housing sector, and more stable oil prices, would help lay the basis for incipient recovery in the course of 2009, but the revival is expected to be much more gradual than in most previous economic cycles, as tight credit conditions continue to weigh heavily on domestic demand.
Most other advanced economies are also expected to go through a period of extremely sluggish growth, or even contraction, and experience only a modest upturn in 2009. The WEO projects advanced countries in aggregate will slow to 1.5 percent year-on-year in 2008 from 2.6 percent in 2007, and ease further to 0.5 percent in 2009.
The WEO projects growth in emerging and developing economies will continue decelerating, falling somewhat below trend during the second half of 2008 to year-on-year growth of 6.9 percent, down from 8.0 percent in 2007. Growth will moderate further to 6.1 percent in 2009.
Inflation in the advanced economies is expected to be contained by a combination of increasing slack and the stabilization of commodity prices, and could recede below 2 percent by the end of 2009. In emerging and developing economies, inflation is projected to remain around 8 percent at the end of 2008, before easing to around 6½ percent in 2009.
"Policymakers around the world are facing the daunting task of stabilizing financial conditions while nursing their economies through a period of slower growth and higher inflation," Mr. Blanchard said, adding that financial markets and institutions must be placed on a healthier footing, and supply-demand responses in commodity markets must be strengthened.
ANNEX
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| (Percent change, unless otherwise noted) |
| |
Year over Year |
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Q4 over Q4 |
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Difference from July |
Estimates |
Projections |
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| |
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Projections |
2008 WEO Projections |
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| |
2006 |
2007 |
2008 |
2009 |
2008 |
2009 |
2007 |
2008 |
2009 |
| |
|
World output1 |
5.1 |
5.0 |
3.9 |
3.0 |
-0.2 |
-0.9 |
4.8 |
2.8 |
3.2 |
|
Advanced economies |
3.0 |
2.6 |
1.5 |
0.5 |
-0.2 |
-0.9 |
2.6 |
0.7 |
1.0 |
|
United States |
2.8 |
2.0 |
1.6 |
0.1 |
0.3 |
-0.7 |
2.3 |
0.8 |
0.4 |
|
Euro area |
2.8 |
2.6 |
1.3 |
0.2 |
-0.4 |
-1.0 |
2.1 |
0.4 |
0.6 |
|
Germany |
3.0 |
2.5 |
1.8 |
-- |
-0.2 |
-1.0 |
1.7 |
0.7 |
0.6 |
|
France |
2.2 |
2.2 |
0.8 |
0.2 |
-0.8 |
-1.2 |
2.2 |
-0.1 |
0.8 |
|
Italy |
1.8 |
1.5 |
-0.1 |
-0.2 |
-0.6 |
-0.7 |
0.1 |
-0.1 |
0.2 |
|
Spain |
3.9 |
3.7 |
1.4 |
-0.2 |
-0.4 |
-1.4 |
3.2 |
0.1 |
0.1 |
|
Japan |
2.4 |
2.1 |
0.7 |
0.5 |
-0.8 |
-1.0 |
1.4 |
0.2 |
0.9 |
|
United Kingdom |
2.8 |
3.0 |
1.0 |
-0.1 |
-0.8 |
-1.8 |
2.9 |
-0.3 |
0.7 |
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Canada |
3.1 |
2.7 |
0.7 |
1.2 |
-0.3 |
-0.7 |
2.8 |
0.3 |
1.7 |
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Other advanced economies |
4.5 |
4.7 |
3.1 |
2.5 |
-0.2 |
-0.8 |
5.0 |
2.0 |
3.7 |
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Newly industrialized Asian economies |
5.6 |
5.6 |
4.0 |
3.2 |
-0.2 |
-1.1 |
6.1 |
2.6 |
5.4 |
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Emerging and developing economies2 |
7.9 |
8.0 |
6.9 |
6.1 |
-- |
-0.6 |
8.5 |
6.1 |
6.5 |
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Africa |
6.1 |
6.3 |
5.9 |
6.0 |
-0.5 |
-0.4 |
... |
... |
... |
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Sub-Sahara |
6.6 |
6.9 |
6.1 |
6.3 |
-0.5 |
-0.5 |
... |
... |
... |
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Central and eastern Europe |
6.7 |
5.7 |
4.5 |
3.4 |
-0.1 |
-1.1 |
... |
... |
... |
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Commonwealth of Independent States |
8.2 |
8.6 |
7.2 |
5.7 |
-0.6 |
-1.5 |
... |
... |
... |
|
Russia |
7.4 |
8.1 |
7.0 |
5.5 |
-0.7 |
-1.8 |
9.5 |
5.9 |
5.8 |
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Excluding Russia |
10.2 |
9.8 |
7.6 |
6.2 |
-0.2 |
-0.8 |
... |
... |
... |
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Developing Asia |
9.9 |
10.0 |
8.4 |
7.7 |
-- |
-0.7 |
... |
... |
... |
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China |
11.6 |
11.9 |
9.7 |
9.3 |
-- |
-0.5 |
11.3 |
9.2 |
9.4 |
|
India |
9.8 |
9.3 |
7.9 |
6.9 |
-0.1 |
-1.1 |
8.9 |
7.2 |
6.9 |
|
ASEAN-5 |
5.7 |
6.3 |
5.5 |
4.9 |
-0.1 |
-1.0 |
6.6 |
4.7 |
5.7 |
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Middle East |
5.7 |
5.9 |
6.4 |
5.9 |
0.2 |
-0.1 |
... |
... |
... |
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Western Hemisphere |
5.5 |
5.6 |
4.6 |
3.2 |
0.1 |
-0.4 |
... |
... |
... |
|
Brazil |
3.8 |
5.4 |
5.2 |
3.5 |
0.3 |
-0.5 |
6.2 |
3.9 |
3.7 |
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Mexico |
4.9 |
3.2 |
2.1 |
1.8 |
-0.3 |
-0.6 |
4.2 |
0.9 |
2.4 |
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Memorandum |
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European Union |
3.3 |
3.1 |
1.7 |
0.6 |
-0.4 |
-1.1 |
... |
... |
... |
|
World growth based on market exchange rates |
3.9 |
3.7 |
2.7 |
1.9 |
-0.2 |
-0.8 |
... |
... |
... |
| |
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World trade volume (goods and services) |
9.3 |
7.2 |
4.9 |
4.1 |
-1.2 |
-1.9 |
... |
... |
... |
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Imports |
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|
Advanced economies |
7.5 |
4.5 |
1.9 |
1.1 |
-1.6 |
-2.3 |
... |
... |
... |
|
Emerging and developing economies |
14.7 |
14.2 |
11.7 |
10.5 |
-0.7 |
-1.1 |
... |
... |
... |
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Exports |
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Advanced economies |
8.4 |
5.9 |
4.3 |
2.5 |
-0.7 |
-1.8 |
... |
... |
... |
|
Emerging and developing economies |
11.0 |
9.5 |
6.3 |
7.4 |
-2.0 |
-1.7 |
... |
... |
... |
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Commodity prices (U.S. dollars) |
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Oil3 |
20.5 |
10.7 |
50.8 |
-6.3 |
-13.0 |
-13.6 |
... |
... |
... |
|
Nonfuel (average based on world |
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commodity export weights) |
23.2 |
14.1 |
13.3 |
-6.2 |
-1.3 |
-1.0 |
... |
... |
... |
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Consumer prices |
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Advanced economies |
2.4 |
2.2 |
3.6 |
2.0 |
0.2 |
-0.3 |
3.0 |
3.3 |
1.7 |
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Emerging and developing economies2 |
5.4 |
6.4 |
9.4 |
7.8 |
0.3 |
0.4 |
6.7 |
7.9 |
6.2 |
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London interbank offered rate (percent)4 |
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On U.S. dollar deposits |
5.3 |
5.3 |
3.2 |
3.1 |
0.4 |
-0.5 |
... |
... |
... |
|
On euro deposits |
3.1 |
4.3 |
4.8 |
4.2 |
-0.2 |
-1.1 |
... |
... |
... |
|
On Japanese yen deposits |
0.4 |
0.9 |
1.0 |
1.2 |
-0.1 |
-0.3 |
... |
... |
... |
| |
|
Note: Real effective exchange rates are assumed to remain constant at the levels prevailing during August 18-September 15, 2008.
1The quarterly estimates and projections account for 90 percent of the world PPP weights.
2The quarterly estimates and projections account for approximately 76 percent of the emerging and developing economies.
3Simple average of prices of U.K. Brent, Dubai, and West Texas Intermediate crude oil. The average price of oil in U.S. dollars a barrel was $71.13 in 2007; the assumed price based on future markets is $107.25 in 2008 and $100.50 in 2009.
4Six-month rate for the United States and Japan. Three-month rate for the euro area. |
Overview of the World Economic Outlook Projections
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| |
| (Percent change, unless otherwise noted) |
| |
Year over Year |
|
|
Q4 over Q4 |
| |
|
|
|
|
Difference from July |
Estimates |
Projections |
|
| |
|
|
Projections |
2008 WEO Projections |
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| |
2006 |
2007 |
2008 |
2009 |
2008 |
2009 |
2007 |
2008 |
2009 |
| |
|
World output1 |
5.1 |
5.0 |
3.9 |
3.0 |
-0.2 |
-0.9 |
4.8 |
2.8 |
3.2 |
|
Advanced economies |
3.0 |
2.6 |
1.5 |
0.5 |
-0.2 |
-0.9 |
2.6 |
0.7 |
1.0 |
|
United States |
2.8 |
2.0 |
1.6 |
0.1 |
0.3 |
-0.7 |
2.3 |
0.8 |
0.4 |
|
Euro area |
2.8 |
2.6 |
1.3 |
0.2 |
-0.4 |
-1.0 |
2.1 |
0.4 |
0.6 |
|
Germany |
3.0 |
2.5 |
1.8 |
-- |
-0.2 |
-1.0 |
1.7 |
0.7 |
0.6 |
|
France |
2.2 |
2.2 |
0.8 |
0.2 |
-0.8 |
-1.2 |
2.2 |
-0.1 |
0.8 |
|
Italy |
1.8 |
1.5 |
-0.1 |
-0.2 |
-0.6 |
-0.7 |
0.1 |
-0.1 |
0.2 |
|
Spain |
3.9 |
3.7 |
1.4 |
-0.2 |
-0.4 |
-1.4 |
3.2 |
0.1 |
0.1 |
|
Japan |
2.4 |
2.1 |
0.7 |
0.5 |
-0.8 |
-1.0 |
1.4 |
0.2 |
0.9 |
|
United Kingdom |
2.8 |
3.0 |
1.0 |
-0.1 |
-0.8 |
-1.8 |
2.9 |
-0.3 |
0.7 |
|
Canada |
3.1 |
2.7 |
0.7 |
1.2 |
-0.3 |
-0.7 |
2.8 |
0.3 |
1.7 |
|
Other advanced economies |
4.5 |
4.7 |
3.1 |
2.5 |
-0.2 |
-0.8 |
5.0 |
2.0 |
3.7 |
|
Newly industrialized Asian economies |
5.6 |
5.6 |
4.0 |
3.2 |
-0.2 |
-1.1 |
6.1 |
2.6 |
5.4 |
| |
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|
Emerging and developing economies2 |
7.9 |
8.0 |
6.9 |
6.1 |
-- |
-0.6 |
8.5 |
6.1 |
6.5 |
|
Africa |
6.1 |
6.3 |
5.9 |
6.0 |
-0.5 |
-0.4 |
... |
... |
... |
|
Sub-Sahara |
6.6 |
6.9 |
6.1 |
6.3 |
-0.5 |
-0.5 |
... |
... |
... |
|
Central and eastern Europe |
6.7 |
5.7 |
4.5 |
3.4 |
-0.1 |
-1.1 |
... |
... |
... |
|
Commonwealth of Independent States |
8.2 |
8.6 |
7.2 |
5.7 |
-0.6 |
-1.5 |
... |
... |
... |
|
Russia |
7.4 |
8.1 |
7.0 |
5.5 |
-0.7 |
-1.8 |
9.5 |
5.9 |
5.8 |
|
Excluding Russia |
10.2 |
9.8 |
7.6 |
6.2 |
-0.2 |
-0.8 |
... |
... |
... |
|
Developing Asia |
9.9 |
10.0 |
8.4 |
7.7 |
-- |
-0.7 |
... |
... |
... |
|
China |
11.6 |
11.9 |
9.7 |
9.3 |
-- |
-0.5 |
11.3 |
9.2 |
9.4 |
|
India |
9.8 |
9.3 |
7.9 |
6.9 |
-0.1 |
-1.1 |
8.9 |
7.2 |
6.9 |
|
ASEAN-5 |
5.7 |
6.3 |
5.5 |
4.9 |
-0.1 |
-1.0 |
6.6 |
4.7 |
5.7 |
|
Middle East |
5.7 |
5.9 |
6.4 |
5.9 |
0.2 |
-0.1 |
... |
... |
... |
|
Western Hemisphere |
5.5 |
5.6 |
4.6 |
3.2 |
0.1 |
-0.4 |
... |
... |
... |
|
Brazil |
3.8 |
5.4 |
5.2 |
3.5 |
0.3 |
-0.5 |
6.2 |
3.9 |
3.7 |
|
Mexico |
4.9 |
3.2 |
2.1 |
1.8 |
-0.3 |
-0.6 |
4.2 |
0.9 |
2.4 |
| |
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Memorandum |
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|
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|
|
European Union |
3.3 |
3.1 |
1.7 |
0.6 |
-0.4 |
-1.1 |
... |
... |
... |
|
World growth based on market exchange rates |
3.9 |
3.7 |
2.7 |
1.9 |
-0.2 |
-0.8 |
... |
... |
... |
| |
|
|
|
|
|
|
|
|
|
|
World trade volume (goods and services) |
9.3 |
7.2 |
4.9 |
4.1 |
-1.2 |
-1.9 |
... |
... |
... |
|
Imports |
|
|
|
|
|
|
|
|
|
|
Advanced economies |
7.5 |
4.5 |
1.9 |
1.1 |
-1.6 |
-2.3 |
... |
... |
... |
|
Emerging and developing economies |
14.7 |
14.2 |
11.7 |
10.5 |
-0.7 |
-1.1 |
... |
... |
... |
|
Exports |
|
|
|
|
|
|
|
|
|
|
Advanced economies |
8.4 |
5.9 |
4.3 |
2.5 |
-0.7 |
-1.8 |
... |
... |
... |
|
Emerging and developing economies |
11.0 |
9.5 |
6.3 |
7.4 |
-2.0 |
-1.7 |
... |
... |
... |
| |
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|
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|
|
|
|
|
|
Commodity prices (U.S. dollars) |
|
|
|
|
|
|
|
|
|
|
Oil3 |
20.5 |
10.7 |
50.8 |
-6.3 |
-13.0 |
-13.6 |
... |
... |
... |
|
Nonfuel (average based on world |
|
|
|
|
|
|
|
|
|
|
commodity export weights) |
23.2 |
14.1 |
13.3 |
-6.2 |
-1.3 |
-1.0 |
... |
... |
... |
| |
|
|
|
|
|
|
|
|
|
|
Consumer prices |
|
|
|
|
|
|
|
|
|
|
Advanced economies |
2.4 |
2.2 |
3.6 |
2.0 |
0.2 |
-0.3 |
3.0 |
3.3 |
1.7 |
|
Emerging and developing economies2 |
5.4 |
6.4 |
9.4 |
7.8 |
0.3 |
0.4 |
6.7 |
7.9 |
6.2 |
| |
|
|
|
|
|
|
|
|
|
|
London interbank offered rate (percent)4 |
|
|
|
|
|
|
|
|
|
|
On U.S. dollar deposits |
5.3 |
5.3 |
3.2 |
3.1 |
0.4 |
-0.5 |
... |
... |
... |
|
On euro deposits |
3.1 |
4.3 |
4.8 |
4.2 |
-0.2 |
-1.1 |
... |
... |
... |
|
On Japanese yen deposits |
0.4 |
0.9 |
1.0 |
1.2 |
-0.1 |
-0.3 |
... |
... |
... |
| |
|
Note: Real effective exchange rates are assumed to remain constant at the levels prevailing during August 18-September 15, 2008.
1The quarterly estimates and projections account for 90 percent of the world PPP weights.
2The quarterly estimates and projections account for approximately 76 percent of the emerging and developing economies.
3Simple average of prices of U.K. Brent, Dubai, and West Texas Intermediate crude oil. The average price of oil in U.S. dollars a barrel was $71.13 in 2007; the assumed price based on future markets is $107.25 in 2008 and $100.50 in 2009.
4Six-month rate for the United States and Japan. Three-month rate for the euro area. |
|
