World Economic Outlook, October 2010: Recovery, Risk, and Rebalancing
World Economic Outlook, October 6, 2010
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- World Economic Outlook, October 2010: Recovery, Risk, and Rebalancing
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Bibliographic details
- Published: October 6, 2010
- Series: World Economic Outlook
- DOI: https://doi.org/10.5089/9781589069473.081
Overview and main messages
- Publication date: October 6, 2010
- Central assessment: The recovery from the Great Recession is proceeding broadly as expected, but most advanced economies and a few emerging economies still face large adjustments, are recovering only sluggishly, and have continued high unemployment.
- Divergence in performance:
- Many emerging and developing economies are again seeing strong growth.
- Advanced economies require internal rebalancing (strengthening private demand to allow for fiscal consolidation).
- External rebalancing needed: increase in net exports in deficit countries and decrease in net exports in surplus countries, notably emerging Asia.
- Analytical focus:
- One analytical chapter examines the effects on output and employment of fiscal consolidation in advanced economies using detailed budget data.
- The other analytical chapter examines the collapse and recovery of trade in economies that have experienced crises.
Findings and analytical conclusions
- Recovery characterization:
- Recovery is broadly as expected overall, but heterogenous across countries and regions.
- Advanced economies: sluggish recoveries and continued high unemployment.
- Emerging and developing economies: many showing strong growth.
- Rebalancing requirements:
- Internal rebalancing: strengthening private demand in advanced economies as a prerequisite for sustainable fiscal consolidation.
- External rebalancing: adjustment of net exports with deficit countries increasing net exports and surplus countries (notably emerging Asia) reducing net exports.
- Policy interactions: The edition examines interactions between internal and external rebalancing and the policies required to support these adjustments.
- Trade dynamics: The collapse and recovery of trade in crisis-hit economies are examined to understand trade's role in the global recovery.
Policy implications and recommendations
- Support internal rebalancing in advanced economies by policies that strengthen private demand to create space for fiscal consolidation.
- Facilitate external rebalancing by encouraging adjustments in net export positions:
- Deficit countries: policies to increase net exports.
- Surplus countries, notably emerging Asia: policies to decrease net exports.
- Use detailed budget data to assess the short-term and medium-term effects of fiscal consolidation on output and employment when designing consolidation strategies.
- Address trade collapse and recovery dynamics in crisis-affected economies to bolster global recovery.