## Two-speed Global Recovery Continues _IMF Blog, January 25, 2011_ ## Source details **Canonical URL:** [Two-speed Global Recovery Continues](https://www.imf.org/en/blogs/articles/2011/01/25/two-speed-global-recovery-continues) ## Other formats - [Markdown version](/en/blogs/articles/2011/01/25/two-speed-global-recovery-continues/index.md) - [Structured JSON version](/en/blogs/articles/2011/01/25/two-speed-global-recovery-continues/index.json) - [Bundle manifest](/en/blogs/articles/2011/01/25/two-speed-global-recovery-continues/bundle-manifest.json) ## Bibliographic details - Authors: Olivier Blanchard - Published: January 25, 2011 --- ### The outlook - Global growth is set to slow as fiscal stimulus and restocking of inventories—previous drivers of activity—are "essentially over." - Global growth projection: 4.4 percent in 2011, down from 5 percent in 2010. - Emerging and developing countries: - Gross Domestic Product increase projected at 6.5 percent in 2011, compared with 7.1 percent in 2010. - Most have "few scars from the crisis"; some (e.g., South Africa) benefit from strong commodity prices. - In many emerging market countries, output is now back to potential and the policy challenge is to avoid overheating. - Advanced countries: - Growth anticipated at 2.5 percent in 2011, compared to 3 percent in 2010. - Growth at this pace is "barely enough to dent high unemployment" and raises social concerns. - Advanced countries still need to work off pre-crisis excesses and fully repair financial systems; many face fiscal challenges, "most pressingly in the euro area." - Global imbalances: - Little progress is being made. - U.S. growth expected to be based on domestic demand while net exports deteriorate; risk of replicating pre-crisis growth dynamics with public dissaving replacing low private saving. - Without fundamental changes in China, the current account surplus is expected to rebound from its lower level this year. ### Tensions and risks - Four main short-term tensions and risks stemming from the uneven recovery: 1. Rising commodity prices - Actual prices remain below pre-crisis peaks. - Food price increases driven mainly by one time supply-side factors; effects should wind down over the course of 2011. - Oil price pressures come from the demand side: "In the second half of last year, unexpected consumption growth of 2 percent resulted in a price increase of roughly 10 percent." - Strong world growth likely to be associated with further increases, with important implications for emerging and developing economies. 2. Capital flows into emerging markets - Inflows have increased but for most countries remain below previous peaks and have been receding in the last couple of months. - The recent decrease suggests that the U.S. Fed’s QE2 "may not be having the impact that many emerging markets anticipated." - These flows raise policy choices on currency appreciation, macroeconomic policy, macro prudential tools, and capital controls. 3. Risks in "peripheral" Europe - Macro and fiscal adjustment in some countries is likely to be long and painful. - Markets worry that implementation could go off track, leading to concerns about sovereign debt and banks, and reverse spillovers from banks to sovereigns. 4. Risks from continuing global imbalances - If rebalancing does not take place, absent an improvement in net exports, U.S. growth likely to remain subdued, complicating withdrawal of fiscal stimulus. - If stimulus is not withdrawn, long-term fiscal challenges will intensify; either way, problems will emerge later for the U.S. and the rest of the world. ### Three-pronged policy strategy - A three-pronged strategy is necessary to reduce risks and strengthen the global recovery: 1. Emerging and developing countries - Macroeconomic policies need to shift to avoid overheating. 2. "Peripheral" Europe - Urgent measures include clarifying banks' exposures, backed by recapitalization schemes if and where needed (as outlined in the IMF’s update of global financial stability). - Importance of "give time to time": back fiscal and macroeconomic commitments with deeds, provide adequate multilateral funding if and where needed, and ensure ECB liquidity to remove panic scenarios. 3. Reducing global imbalances - For China and other surplus countries: structural reforms and currency appreciation. - For the U.S. and other advanced countries: fiscal consolidation and credible medium term fiscal adjustment plans (many advanced countries, including the U.S., "have not yet put in place a credible medium term fiscal adjustment plan," and this is urgently needed). - Dealing with global imbalances is framed as "essential to achieve a sustained, lasting, world recovery." *Olivier Blanchard — January 25, 2011* --- ## Content in this bundle - **012511aa** - [012511aa (PDF)](/external/arabic/np/vc/2011/012511aa.pdf){rel="external" type="text/html; charset=utf-8"} - **全球经济继续双速复苏, 2011 年1 月25 日** - [全球经济继续双速复苏, 2011 年1 月25 日 (Markdown version)](/external/chinese/np/vc/2011/012511ac.pdf.md){rel="alternate" type="text/markdown"} - [全球经济继续双速复苏, 2011 年1 月25 日 (PDF)](/external/chinese/np/vc/2011/012511ac.pdf){rel="external" type="application/pdf"} - **二極化が続く世界経済の回復** - [二極化が続く世界経済の回復 (Markdown version)](/external/japanese/np/vc/2011/012511j_ob.pdf.md){rel="alternate" type="text/markdown"} - [二極化が続く世界経済の回復 (PDF)](/external/japanese/np/vc/2011/012511j_ob.pdf){rel="external" type="application/pdf"} - **По-прежнему два темпа глобального экономического подъема** - [По-прежнему два темпа глобального экономического подъема (Markdown version)](/external/russian/np/vc/2011/012511ar.pdf.md){rel="alternate" type="text/markdown"} - [По-прежнему два темпа глобального экономического подъема (PDF)](/external/russian/np/vc/2011/012511ar.pdf){rel="external" type="application/pdf"} --- ## References - [our latest World Economic Outlook update](http://www.imf.org/external/pubs/ft/weo/2011/update/01/index.htm) - [update of global financial stability](http://www.imf.org/External/Pubs/FT/fmu/eng/2011/01/index.htm) _Source: https://www.imf.org/en/blogs/articles/2011/01/25/two-speed-global-recovery-continues_