IMF World Economic Outlook (WEO) — Coping with High Debt and Sluggish Growth, October 2012 — Table of Contents

World Economic Outlook, October 9, 2012

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The recovery "has suffered new setbacks, and uncertainty weighs heavily on the outlook."
Key risks identified: "the ongoing euro area crisis" and the "fiscal cliff" facing U.S. policymakers.
Policies in the major advanced economies "have not rebuilt confidence in medium-term prospects."
Tail risks include: viability of the euro area and major U.S. fiscal policy mistakes.
WEO forecast: "only a gradual strengthening of activity from the relatively disappointing pace of early 2012."
Boxes of focus: short-term fiscal multipliers; implications of high public debt in advanced economies; how uncertainty affects economic performance; unconventional energy in the United States; food supply crunch and vulnerability.
Figures and indicators covered: Global Indicators; Euro Area Developments; Fiscal Policies; Monetary Policies; Emerging Market Conditions; Global Inflation; Risks to the Global Outlook; Upside and Downside Scenarios; Lower Global Growth Scenario; Crisis Comparisons; Global Imbalances; Euro Area Imbalances; IMF Commodity Price Index; Oil Prices and Volatility.

Global growth "slowed again during the second quarter of 2012 after rebounding during the first."
The slowing "was observed in all regions," pointing to important common factors and spillovers from large country-specific or regional shocks.
Principal shocks and factors:
- Ratcheting up of financial stress in the euro area periphery in the second quarter of 2012.
- Domestic demand slowdown in many economies in Asia and Latin America (notably Brazil, China, and India), reflecting both weaker external demand from Europe and domestic factors.
- Deceleration of growth in the United States.
Covered regional and country group indicators: Selected European Economies; Selected Advanced Economies; Selected Asian Economies; Selected Western Hemisphere Economies; Commonwealth of Independent States; Selected Middle East and North African Economies; Selected Sub-Saharan African Economies.
Analytical products: Revisions to WEO Growth Projections for 2012 and 2013; Effects of Lower Potential Growth; Weekly Equity and Bond Fund Flows during Financial Stress in Advanced Economies; Revisions to 2013 GDP Growth Forecasts by region; Financing Conditions for Euro Area Periphery Economies and the United States, 2007-12; Changes in Stress Indicators, 2007–12; Global Weekly Capital Flows; Global Fund Flows during Stress; Composition of Capital Flows during Stress; Global Asset Price Performance around Stress Episodes; Global Trade Linkages with Advanced Economies and China.

Historical scope: analyzes "100 years of history of dealing with public debt overhangs."
Key conclusion: "the first priority today must be to complement fiscal consolidation with measures to support growth, especially, very accommodative monetary policy and structural reforms."
Tabulated and case-study focus:
- Differentiating episodes by the change in the debt-to-GDP ratio.
- Public Debt in Advanced Economies.
- Debt-to-GDP dynamics after public debt reaches 100 percent of GDP.
- Country case studies: United Kingdom (deflation after World War I); United States (debt dynamics after World War II); Japan (Lost Decade); Italy; Belgium; Canada (fiscal consolidation after 1985).
- Decomposition of debt dynamics in case study countries; contribution to GDP from exports.
Policy implication emphasized: fiscal consolidation should be accompanied by growth-supporting policies (monetary accommodation and structural reforms).

Central question: "Will It Last?" — whether the strong performance of many emerging market and developing economies will continue.
Reasons for optimism: "improved policymaking and greater 'policy space'—room to respond to shocks without undermining sustainability."
Factors discussed:
- Activity slowed in some emerging market and developing economies because of policy tightening in response to capacity constraints, weaker demand from advanced economies, and country-specific factors.
- Policy improvements have "raised these economies' resilience to shocks."
Empirical and thematic analyses:
- Labor market trends and Okun’s Law (Diverging Global Labor Market Trends, 2007–11; Distribution of Okun’s Law Coefficients and Employment Responsiveness, 2007–11).
- Composition of China's growth and imports; increasing exports to China; impact of an investment slowdown in China.
- Resilience examples: Kenya and Tanzania.
- Analyses of what ends expansions and recoveries; AR(1) median coefficients and robustness checks; determinants of Okun coefficients and employment responsiveness.
- Quantitative assessments: effects of shocks, policies, and structural characteristics on expansion duration and speed of recovery; frequency of various types of domestic and external shocks; policy frameworks and policy space; contribution of shocks, policies, and structure to the length of expansions.

Annex: IMF Executive Board Discussion of the Outlook, September 2012.
Statistical Appendix contents: 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.
Classification tables include: 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.
Lists of data tables (parts A and B) covering Output, Inflation, Financial Policies, Foreign Trade, Current Account Transactions, Balance of Payments and External Financing, Flow of Funds, External Debt and Debt Service, Medium–Term Baseline Scenario.

IMF World Economic Outlook (WEO), October 2012 — Table of Contents