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World Economic and Financial Surveys

World Economic Outlook (WEO)

Coping with High Debt and Sluggish Growth

October 2012

The October 2012 World Economic Outlook (WEO) assesses the prospects for the global recovery in light of such risks as the ongoing euro area crisis and the "fiscal cliff" facing U.S. policymakers. Reducing the risks to the medium-term outlook implies reducing public debt in the major advanced economies, and Chapter 3 explores 100 years of history of dealing with public debt overhangs. In emerging market and developing economies, activity has been slowed by policy tightening in response to capacity constraints, weaker demand from advanced economies, and country-specific factors, but policy improvements have raised these economies' resilience to shocks, an issue explored in depth in Chapter 4.


Contents

Chapter 1: Global Prospects and Policies

Boxes
Chart Data 1.1 Are We Underestimating Short-term Fiscal Multipliers?
Chart
Chart
Chart
Data
Data
Data
1.2 The Implications of High Public Debt in Advanced Economies
Chart Data 1.3 How Does Uncertainty Affect Economic Performance?
    1.4 Unconventional Energy in the United States
Chart Data 1.5 Food Supply Crunch—Who Is Most Vulnerable?
Tables
1.1 Overview of the World Economic Outlook Projections
1.SF.1 Indices of Market Prices for Nonfuel and Fuel Commodities, 2009–12
1.SF.2 Global Oil Supply and Demand by Region
1.1.1 Growth Forecast Errors and Fiscal Consolidation
1.2.1 Importance of the Intertemporal Elasticity of Substitution
1.3.1 Uncertainty over the Business Cycle
1.3.2 Uncertainty and Growth
1.3.3 Uncertainty and Business Cycles
1.5.1 Regional Food Vulnerability
Figures
Chart Data 1.1 Global Indicators
Chart Data 1.2 Euro Area Developments
Chart Data 1.3 Current and Forward-Looking Growth Indicators
Chart Data 1.4 Fiscal Policies
Chart Data 1.5 Monetary Policies
Chart Data 1.6 Recent Financial Market Developments
Chart Data 1.7 Emerging Market Conditions
Chart Data 1.8 GDP Growth
Chart   1.9 Overheating Indicators for the G20 Economies
Chart Data 1.10 Global Inflation
Chart Data 1.11 Risks to the Global Outlook
Chart Data 1.12 Recessions and Deflation Risks
Chart Data 1.13 Upside and Downside Scenarios
Chart Data 1.14 Output in Emerging Market and Developing Economies
Chart Data 1.15 Lower Global Growth Scenario
Chart Data 1.16 Crisis Comparisons
Chart Data 1.17 Global Imbalances
Chart Data 1.18 Euro Area Imbalances
Chart Data 1.SF.1 IMF Commodity Price Index
Chart Data 1.SF.2 Oil Prices and Volatility
Chart Data 1.SF.3 Base Metal Spot Prices
Chart Data 1.SF.4 Food Prices and Volatility
Chart Data 1.SF.5 Influence of Common Factors: Pairwise Correlations with First Principal Components
Chart Data 1.SF.6 Commodity Prices and Economic Activity: First Principal Components
Chart Data 1.SF.7 Demand for Base Metals
Chart Data 1.SF.8 Oil Supply and Demand
Chart Data 1.SF.9 Oil Inventories and Spare Capacity
Chart Data 1.SF.10 Inventory Buffers for Food
Chart Data 1.SF.11 Futures Prices
Chart Data 1.SF.12 Price Prospects for Selected Commodities

Chapter 2: Country and Regional Perspectives

Tables
2.1 Selected European Economies: Real GDP, Consumer Prices, Current Account Balance, and Unemployment
2.2 Selected Advanced Economies: Real GDP, Consumer Prices, Current Account Balance, and Unemployment
2.3 Selected Asian Economies: Real GDP, Consumer Prices, Current Account Balance, and Unemployment
2.4 Selected Western Hemisphere Economies: Real GDP, Consumer Prices, Current Account Balance, and Unemployment
2.5 Commonwealth of Independent States: Real GDP, Consumer Prices, Current Account Balance, and Unemployment
2.6 Selected Middle East and North African Economies: Real GDP, Consumer Prices, Current Account Balance, and Unemployment
2.7 Selected Sub-Saharan African Economies: Real GDP, Consumer Prices, Current Account Balance, and Unemployment
2.SF.1 Behavior of Stress Indicators, 2007–12
2.SF.2 Data for Spillover Focus
Figures
Chart Data 2.1 Revisions to WEO Growth Projections for 2012 and 2013
Chart Data 2.2 The Effects of Lower Potential Growth
Chart Data 2.3 Weekly Equity and Bond Fund Flows during Financial Stress in Advanced Economies
Chart Data 2.4 Europe: Revisions to 2013 GDP Growth Forecasts
Chart Data 2.5 Europe: In the Midst of Economic and Financial Stress
Chart Data 2.6 United States and Canada: Revisions to 2013 GDP Growth Forecasts
Chart Data 2.7 United States and Canada: A Weak Recovery
Chart Data 2.8 Asia: Revisions to 2013 GDP Growth Forecasts
Chart Data 2.9 Asia: Activity Decelerates
Chart Data 2.10 Latin America and the Caribbean: Revisions to 2013 GDP Growth Forecasts
Chart Data 2.11 Latin America: A Moderate Slowdown
Chart Data 2.12 Commonwealth of Independent States: Revisions to 2013 GDP Growth Forecasts
Chart Data 2.13 Commonwealth of Independent States: Vulnerable to Negative Spillovers
Chart Data 2.14 Middle East and North Africa: Revisions to 2013 GDP Growth Forecasts
Chart Data 2.15 Middle East and North Africa: An Uneven Recovery
Chart Data 2.16 Sub-Saharan Africa: Revisions to 2013 GDP Growth Forecasts
Chart Data 2.17 Sub-Saharan Africa: A Strong Expansion
Chart Data 2.SF.1 Financing Conditions for Euro Area Periphery Economies and the United States, 2007-12
Chart Data 2.SF.2 Changes in Stress Indicators, 2007–12
Chart Data 2.SF.3 Global Weekly Capital Flows
Chart Data 2.SF.4 Global Fund Flows during Stress
Chart Data 2.SF.5 The Composition of Capital Flows during Stress
Chart Data 2.SF.6 Global Asset Price Performance around Stress Episodes
Chart Data 2.SF.7 Global Trade Linkages with Advanced Economies and China

Chapter 3: The Good, the Bad, and the Ugly: 100 Years of Dealing with Public Debt Overhangs

Table
3.1 Differentiating Episodes by the Change in the Debt-to-GDP Ratio
Figures
Chart Data 3.1 Public Debt in Advanced Economies
Chart Data 3.2 Debt-to-GDP Dynamics after Public Debt Reaches 100 Percent of GDP
Chart Data 3.3 Debt-to-GDP Dynamics
Chart Data 3.4 High Debt, Growth, and Inflation
Chart Data 3.5 Debt and Growth Performance
Chart Data 3.6 Debt-to-GDP Dynamics after Crossing the 100 Percent Threshold
Chart Data 3.7 United Kingdom: Deflation in the Aftermath of World War I
Chart Data 3.8 United States: Debt Dynamics after World War II
Chart Data 3.9 Japan: Lost Decade
Chart Data 3.10 Italy: Fading Zeal
Chart Data 3.11 Belgium: A Marathon Not a Sprint
Chart Data 3.12 Canada: Fiscal Consolidation after 1985
Chart Data 3.13 Decomposition of Debt Dynamics in Case Study Countries
Chart Data 3.14 Contribution to GDP from Exports

Chapter 4: Resilience in Emerging Market and Developing Economies: Will It Last?

Boxes
Chart Data 4.1 Diverging Global Labor Market Trends, 2007–11
Chart Data   Distribution of Okun’s Law Coefficients and Employment Responsiveness, 2007–11
Chart Data   Okun's Law: Employment and Output in Emerging Market and Developing Economies
Chart Data 4.2 Composition of China's Growth and Imports
Chart Data   Increasing Exports to China
Chart Data   Impact of an Investment Slowdown in China
Chart Data 4.3 The Resilience of Kenya and Tanzania
Tables
4.1 What Ends Expansions and Recoveries?
4.2 Data Sources
4.3 Economy Groups
4.4 AR(1) Median Coefficients and Interquartile Range
4.5 What Shortens Expansions? Robustness Checks
4.1.1 Short-Term Relationship between Labor Market Outcomes and Growth, by Country Group
4.1.2 Determinants of Okun Coefficients and Employment Responsiveness
Figures
Chart Data 4.1 The Strong Performance of Emerging Market and Developing Economies
Chart Data 4.2 Diverse Paths of Output
Chart Data 4.3 Dynamics of Output per Capita following Peaks
Chart Data 4.4 Emerging Market and Developing Economy Regions: Dynamics of Output per Capita following Peaks
Chart Data 4.5 Along Which Dimensions Has Emerging Market and Developing Economy Growth Improved?
Chart Data 4.6 Why Have Emerging Market and Developing Economies Become More Resilient?
Chart Data 4.7 Emerging Market and Developing Economies: Effects of Various Shocks on the Likelihood That an Expansion Will End
Chart Data 4.8 Emerging Market and Developing Economies: Effects of Policies on Expansion Duration and Speed of Recovery
Chart Data 4.9 Emerging Market and Developing Economies: Effects of Structural Characteristics on Expansion Duration and Speed of Recovery
Chart Data 4.10 Frequency of Various Types of Domestic and External Shocks to Emerging Market and Developing Economies
Chart Data 4.11 Policy Frameworks and Policy Space in Emerging Market and Developing Economies
Chart Data 4.12 Structural Characteristics of Emerging Market and Developing Economies
Chart Data 4.13 Contribution of Shocks, Policies, and Structure to the Length of Expansions in Emerging Market and Developing Economies
Chart Data 4.14 Emerging Market and Developing Economies: Effects of Changing the Autoregression Model Coefficients
Chart Data 4.15 Emerging Market and Developing Economy Subgroups: Dynamics of Output per Capita following Peaks
Chart Data 4.16 Emerging Market and Developing Economy Regions: Contributions of Shocks, Policies, and Structure to the Length of Expansions

Statistical Appendix

Text (Download PDF)
Assumptions
What's New
Data and Conventions
Classification of Countries
General Features and Composition of Groups in the World Economic Outlook Classification
Table A. Classification by World Economic Outlook Groups and Their Shares in Aggregate GDP, Exports of Goods and Services, and Population, 2011
Table B. Advanced Economies by Subgroup
Table C. European Union
Table D. Emerging and Developing Economies by Region and Main Source of Export Earnings
Table E. Emerging and Developing Economies by Region, Net External Position, and Status as Heavily Indebted Poor Countries
Box A1. Economic Policy Assumptions Underlying the Projections for Selected Economies
 
List of Tables Part A (Download PDF)
Output (Tables A1–A4)
Inflation (Tables A5–A7)
Financial Policies (Table A8)
Foreign Trade (Table A9)
Current Account Transactions (Tables A10–A12)
Balance of Payments and External Financing (Tables A13–A14)
Flow of Funds (Table A15)
Medium–Term Baseline Scenario (Table A16)
 
List of Tables Part B (Download PDF - available on the web only)
Output (Tables B1–B2)
Inflation (Tables B3–B4)
Financial Policies (Tables B5–B10)
Foreign Trade (Tables B11–B13)
Current Account Transactions (Tables B14–B17)
Balance of Payments and External Financing (Tables B18–B20)
External Debt and Debt Service (Tables B21–B26)
Medium-Term Baseline Scenario (Table B27)
 
World Economic Outlook, Selected Topics