World Economic Outlook
Hopes, Realities, Risks
April 2013
Global economic prospects have improved again, but the bumpy recovery and skewed macroeconomic policy mix in advanced economies are complicating policymaking in emerging market economies. Chapter 3 examines the prospects for inflation, particularly because inflation was remarkably stable in the wake of the Great Recession and, in fact, has become less responsive to cyclical conditions. Chapter 4 examines whether today’s fast-growing, dynamic low-income countries are likely to maintain their momentum and avoid the reversals that afflicted many such countries in the past.
Contents
Front Matter
Chapter 1: Global Prospects and Policies
| Boxes | |||
| Chart Chart Chart Chart Chart Chart |
Data Data Data Data Data Data |
1.1 | The Great Divergence of Policies |
| Chart Chart |
Data Data |
1.2 | Public Debt Overhang and Private Sector Performance |
| Chart Chart Chart |
Data Data Data |
1.3 | The Evolution of Current Account Deficits in the Euro Area |
| Table | |||
| 1.1 | Overview of the World Economic Outlook Projections | ||
| Figures | |||
| Chart | Data | 1.1 | Global Indicators |
| Chart | Data | 1.2 | Current and Forward-Looking Growth Indicators |
| Chart | Data | 1.3 | Financial Market Conditions |
| Chart | Data | 1.4 | Monetary Conditions and Bank Lending |
| Chart | Data | 1.5 | Financial Conditions Index |
| Chart | Data | 1.6 | Monetary Policies and Credit in Emerging Market Economies |
| Chart | Data | 1.7 | Fiscal Policies |
| 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 | Global Imbalances |
| Chart | Data | 1.12 | Risks to the Global Outlook |
| Chart | Data | 1.13 | Recession and Deflation Risks |
| Chart | Data | 1.14 | Interest Rate Risk Scenarios |
| Chart | Data | 1.15 | Euro Area Scenarios |
| Chart | Data | 1.16 | Capacity and Credit in Emerging Market Economies |
| Chart | Data | 1.17 | Emerging Market Downside Scenarios |
| Chart | Data | 1.SF.1 | IMF Commodity Price Indices |
| Chart | Data | 1.SF.2 | Equity and Commodity Market Volatility Indices |
| Chart | Data | 1.SF.3 | Commodity Prices and Economic Activity: First Principal Components |
| Chart | Data | 1.SF.4 | Energy Prices |
| Chart | Data | 1.SF.5 | Crude Oil Prices and SVAR Model |
| Chart | Data | 1.SF.6 | Oil Market Prospects |
| Chart | Data | 1.SF.7 | Oil Market Buffers |
| Chart | Data | 1.SF.8 | IMF Food Price Indices |
| Chart | Data | 1.SF.9 | Food Prices and Inventories |
| Chart | Data | 1.SF.10 | Metals: Prices, Demand, and Prospects |
| Chart | Data | 1.SF.11 | Declining Predictive Content of Commodity Futures Prices |
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 | Selected Middle East and North African Economies: Real GDP, Consumer Prices, Current Account Balance, and Unemployment | ||
| 2.6 | Commonwealth of Independent States: Real GDP, Consumer Prices, Current Account Balance, and Unemployment | ||
| Figures | |||
| Chart | Data | 2.1 | World: 2013 GDP Growth Forecasts |
| Chart | Data | 2.2 | Europe: 2013 GDP Growth Forecasts |
| Chart | Data | 2.3 | Advanced Europe: Diminished Crisis Risks amid Prolonged Stagnation |
| Chart | Data | 2.4 | Emerging Europe: A Gradual Recovery from 2012 Slowdown |
| Chart | Data | 2.5 | United States and Canada: Slow but Steady Recovery |
| Chart | Data | 2.6 | United States: Fiscal Developments |
| Chart | Data | 2.7 | Asia: 2013 GDP Growth Forecasts |
| Chart | Data | 2.8 | Asia: Stabilization, Recovery, and Accommodative Policies |
| Chart | Data | 2.9 | Latin America and the Caribbean: 2013 GDP Growth Forecasts |
| Chart | Data | 2.10 | Latin America: Growth Supported by Easy Financing Conditions |
| Chart | Data | 2.11 | Middle East, North Africa, Afghanistan, and Pakistan: 2013 GDP Growth Forecasts |
| Chart | Data | 2.12 | Middle East and North Africa: Narrowing Differences in a Two-Speed Region |
| Chart | Data | 2.13 | Commonwealth of Independent States: 2013 GDP Growth Forecasts |
| Chart | Data | 2.14 | Commonwealth of Independent States: An Improving Outlook with Vulnerability to Global Slowdown |
| Chart | Data | 2.15 | Sub-Saharan Africa: 2013 GDP Growth Forecasts |
| Chart | Data | 2.16 | Sub-Saharan Africa: Continued Resilience |
| Chart | Data | 2.SF.1 | Policy Uncertainty in the United States and Europe |
| Chart | Data | 2.SF.2 | General Uncertainty and Confidence in the United States and Europe |
| Chart | Data | 2.SF.3 | Effect of U.S. or European Policy Uncertainty Shock on Real GDP in Other Regions |
| Chart | Data | 2.SF.4 | Growth Impact of U.S. and European Policy Uncertainty Shocks |
| Chart | Data | 2.SF.5 | Effect of a U.S. or European Policy Uncertainty Shock on Real Investment in Other Regions |
| Chart | Data | 2.SF.6 | Peak Effect of U.S. and European Policy Uncertainty Shock on Real GDP, Consumption, and Investment in Other Regions |
Chapter 3: The Dog That Didn't Bark: Has Inflation Been Muzzled or Was It Just Sleeping?
This chapter finds that inflation expectations have remained strongly anchored to inflation targets during the Great Recession and the sluggish recovery. Long-term inflation expectations in advanced economies remain close to targets despite wide variation in actual inflation rates. Even in Japan, expectations remain close to the 1 percent target announced in February 2012 despite a prolonged period of deflation. Furthermore, coincident with greater central bank credibility, this anchoring is found to have increased over time.
| Box | |||
| 3.1 | Inflation Targeting Still Makes Sense with a Flatter Phillips Curve? | ||
| Figures | |||
| Chart | Data | 3.1 | The Behavior of Inflation Has Changed |
| Chart | Data | 3.2 | Measures of Current Economic Slack |
| Chart | Data | 3.3 | Current Headline Inflation Compared with Expectations |
| Chart | Data | 3.4 | Rolling Regressions of Inflation Expectations over Actual Inflation |
| Chart | Data | 3.5 | Inflation and Cyclical Unemployment |
| Chart | Data | 3.6 | Changes in the Inflation Process |
| Chart | Data | 3.7 | Robustness to Alternative Estimates of the NAIRU |
| Chart | Data | 3.8 | Actual and Predicted Inflation in the United States |
| Chart | Data | 3.9 | Unemployment and Inflation in Selected Economies |
| Chart | Data | 3.10 | Headline Inflation in the United States and Germany |
Chapter 4: Breaking through the Frontier: Can Today's Dynamic Low-Income Countries Make It?
The chapter compares this recent wave of dynamic LICs with the previous wave, primarily dynamic LICs in the 1960s and 1970s, and finds: Important similarities: Both achieved stronger investment rates and export growth than LICs that were unable to takeoff. Striking differences: Today’s dynamic LICs sustained growth with much lower economic vulnerabilities than dynamic LICs in the past. This reflects in part greater reliance on foreign direct investment than on debt-financed investment, as well as faster implementation of structural reforms.
| Tables | |||
| 4.1 | Takeoffs in Low-Income Countries, 1990– 2011 | ||
| 4.2 | Takeoffs in Low-Income Countries before 1990 | ||
| 4.3 | Crises and the Ends of Growth Takeoffs in Low-Income Countries, 1970–2011 | ||
| 4.4 | Explaining Growth Takeoffs in Dynamic Developing Economies | ||
| 4.5 | Data Sources | ||
| 4.6 | Economy Groups | ||
| 4.7 | Logistic Regression Robustness to Alternative Specifications and Definition | ||
| 4.8 | Logistic Regression Robustness to Alternative Estimation Methods, Full Sample | ||
| Figures | |||
| Chart | Data | 4.1 | Economic Performance of Low-Income Countries and Others |
| Chart | Data | 4.2 | Frequency of New and Ongoing Takeoffs in Low-Income Countries |
| Chart | Data | 4.3 | The Global Environment behind Low-Income Countries’ Growth Takeoffs |
| Chart | Data | 4.4 | Real Output per Capita after Takeoff in Low-Income Countries |
| Chart | Data | 4.5 | Economic Structure and Real Output per Capita after Takeoff in Low-Income Countries |
| Chart | Data | 4.6 | Investment and Financing in Low-Income Countries |
| Chart | Data | 4.7 | Macroeconomic Conditions in Low-Income Countries |
| Chart | Data | 4.8 | External Competitiveness, Export Growth, and Diversification in Low-Income Countries |
| Chart | Data | 4.9 | Structural Reforms, Infrastructure, and Political Conditions in Low-Income Countries |
| Chart | Data | 4.10 | Investment and Financing across the Spectrum of Today’s Dynamic Low- Income Countries |
| Chart | Data | 4.11 | Contributors to the Changing Likelihood of a Growth Takeoff in Low-Income Countries |
| Chart | Data | 4.12 | Brazil’s and Korea’s Growth Experience during 1960–90 |
| Chart | Data | 4.13 | Indonesia’s Growth Experience since the 1960s |
| Chart | Data | 4.14 | Mozambique’s Growth Experience since the 1990s |
| Chart | Data | 4.15 | Cambodia’s Growth Experience since the 1990s |
| Chart | Data | 4.16 | Macroeconomic Conditions for Non-HIPC-Eligible Low-Income Countries |
| Chart | Data | 4.17 | Aid and FDI Flows to Non-HIPC-Eligible Low-Income Countries |
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) | |||
| A1. | Summary of World Output | ||
| A2. | Advanced Economies: Real GDP and Total Domestic Demand | ||
| A3. | Advanced Economies: Components of Real GDP | ||
| A4. | Emerging Market and Developing Economies: Real GDP | ||
| A5. | Summary of Inflation | ||
| A6. | Advanced Economies: Consumer Prices | ||
| A7. | Emerging Market and Developing Economies: Consumer Prices | ||
| A8. | Major Advanced Economies: General Government Fiscal Balances and Debt | ||
| A9. | Summary of World Trade Volumes and Prices | ||
| A10. | Summary of Balances on Current Account | ||
| A11. | Advanced Economies: Balance on Current Account | ||
| A12. | Emerging Market and Developing Economies: Balance on Current Account | ||
| A13. | Emerging Market and Developing Economies: Net Financial Flows | ||
| A14. | Emerging Market and Developing Economies: Private Financial Flows | ||
| A15. | Summary of Sources and Uses of World Savings | ||
| A16. | Summary of World Medium-Term Baseline Scenario | ||
| List of Tables Part B (Download PDF - available on the web only) | |||
| B1. | Advanced Economies: Unemployment, Employment, and Real per Capita GDP | ||
| B2. | Emerging Market and Developing Economies: Real GDP | ||
| B3. | Advanced Economies: Hourly Earnings, Productivity, and Unit Labor Costs in Manufacturing | ||
| B4. | Emerging Market and Developing Economies: Consumer Prices | ||
| B5. | Summary of Financial Indicators | ||
| B6. | Advanced Economies: General and Central Government Net Lending/Borrowing and Excluding Social Security Schemes | ||
| B7. | Advanced Economies: General Government Structural Balances | ||
| B8. | Emerging Market and Developing Economies: General Government Net Lending/Borrowing and Overall Fiscal Balance | ||
| B9. | Emerging Market and Developing Economies: General Government Net Lending/Borrowing | ||
| B10. | Advanced Economies: Exchange Rates | ||
| B11. | Emerging Market and Developing Economies: Broad Money Aggregates | ||
| B12. | Advanced Economies: Export Volumes, Import Volumes, and Terms of Trade in Goods and Services | ||
| B13. | Emerging Market and Developing Economies by Region: Total Trade in Goods | ||
| B14. | Emerging Market and Developing Economies by Source of Export Earnings: Total Trade in Goods | ||
| B15. | Advanced Economies: Current Account Transactions | ||
| B16. | Emerging Market and Developing Economies: Balances on Current Account | ||
| B17. | Emerging Market and Developing Economies by Region: Current Account Transactions | ||
| B18. | Emerging Market and Developing Economies by Analytical Criteria: Current Account Transactions | ||
| B19. | Summary of Balance of Payments, Financial Flows, and External Financing | ||
| B20. | Emerging Market and Developing Economies by Region: Balance of Payments and External Financing | ||
| B21. | Emerging Market and Developing Economies by Analytical Criteria: Balance of Payments and External Financing | ||
| B22. | Summary of External Debt and Debt Service | ||
| B23. | Emerging Market and Developing Economies by Region: External Debt by Maturity and Type of Creditor | ||
| B24. | Emerging Market and Developing Economies by Analytical Criteria: External Debt, by Maturity and Type of Creditor | ||
| B25. | Emerging Market and Developing Economies: Ratio of External Debt to GDP | ||
| B26. | Emerging Market and Developing Economies: Debt-Service Ratios | ||
| B27. | Emerging Market and Developing Economies, Medium-Term Baseline Scenario: Selected Economic Indicators | ||
| World Economic Outlook, Selected Topics | |||