World Economic Outlook

Slowing Growth, Rising Risks

September 2011

©2011 International Monetary Fund
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The September 2011 edition of the World Economic Outlook assesses the prospects for the global economy, which is now in a dangerous new phase. Global activity has weakened and become more uneven, confidence has fallen sharply recently, and downside risks are growing. Against a backdrop of unresolved structural fragilities, a barrage of shocks hit the international economy this year, including the devastating Japanese earthquake and tsunami, unrest in some oil-producing countries, and the major financial turbulence in the euro area. Two of the forces now shaping the global economy are high and rising commodity prices and the need for many economies to address large budget deficits. Chapter 3 examines the inflationary effects of commodity price movements and the appropriate monetary policy response. Chapter 4 explores the implications of efforts by advanced economies to restore fiscal sustainability and by emerging and developing economies to tighten fiscal policy to rebuild fiscal policy room and in some cases to restrain overheating pressures.

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Assumptions and Conventions
Further Information and Data
Executive Summary

Chapter 1: Global Prospects and Policies

Slowing Global Activity
Renewed Financial Instability
More Uneven Expansion
Economic Slack alongside Signs of Overheating
Risks Are Clearly to the Downside
Policy Challenges
National Perspectives on Policy Challenges
Multilateral Perspectives on Policy Challenges
Appendix 1.1. Commodity Market Developments and Prospects

Chapter 2: Country and Regional Perspectives

The United States: Weakening Again amid Daunting Debt Challenges
Europe: Enduring Economic and Financial Turbulence
Commonwealth of Independent States: Moderate Growth Performance
Asia: Securing a More Balanced Expansion
Latin America and the Caribbean: Moving toward More Sustainable Growth
Sub-Saharan Africa: Sustaining the Expansion
Middle East and North Africa: Growth Stalling amid Uncertainty

Chapter 3: Target What You Can Hit: Commodity Price Swings and Monetary Policy

Commodity Price Swings and Inflation
Monetary Policy and Food Price Shocks: A Simulation-Based Perspective
Policy Implications for Responding to Commodity Price Shocks
Appendix 3.1. Economies in the Data Set
Appendix 3.2. Technical Appendix

Chapter 4: Separated at Birth? The Twin Budget and Trade Balances

Estimating the Strength of the Twin Deficits Link
Insights from Model-Based Simulations
Summary and Implications for the Outlook
Appendix 4.1 Data Construction and Sources
Appendix 4.2 Statistical Methodology, Robustness Checks, and Selected Additional Results on Export and Import Responses
Appendix 4.3 Global Integrated Monetary and Fiscal Model (GIMF)

Annex: IMF Executive Board Discussion of the Outlook, August 2011
Statistical Appendix
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, 2010
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
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–A15)
Flow of Funds (Table A16)
Medium–Term Baseline Scenario (Table A17)
List of Tables Part B (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–B25)
Medium-Term Baseline Scenario (Table B26)
World Economic Outlook, Selected Topics

Correction to Table 1.3.2 in Chapter 1, Box 3

The logit coefficient for "Equity Price Change in Quarter t (Change in quarterly average equity price index)" for the United States in column (1) wrongly appears as –1.181*** but should instead be –0.181***.