{
  "title": "Global Growth Hits a Soft Patch",
  "publication": "IMF Blog, June 17, 2011",
  "sourceUrl": "https://www.imf.org/en/blogs/articles/2011/06/17/global-growth-hits-a-soft-patch",
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  "summary": "World forecast: 4.3% growth for 2011, and 4.5% for 2012.",
  "sections": [
    {
      "heading": "Global forecast and short-term outlook",
      "content": "- World forecast: 4.3% growth for 2011, and 4.5% for 2012.\n- Change versus April: down by 0.1% for 2011, and unchanged for 2012.\n- Overall assessment: \"Despite a mild slowdown, the global economic recovery continues but the road to health will be a long one. Downside risks, both old and new, are increasing.\""
    },
    {
      "heading": "Advanced vs. emerging and developing economies",
      "content": "- Advanced economies forecast: 2.2% for 2011, and 2.6% for 2012.\n  - Revision: down by 0.2% in 2011, and unchanged for 2012.\n  - Ongoing constraints: fiscal consolidation weighing on demand; continuing weaknesses in the financial system, in particular undercapitalized banks, slowing lending.\n- Emerging and developing economies forecast: 6.6% growth for 2011 and 6.4% for 2012.\n  - Revision: up by 01.% for 2011, and down by 0.1% for 2012.\n  - Risks: some face overheating; many are tightening policy but \"many of them will need to do more.\""
    },
    {
      "heading": "Country-specific revisions and factors",
      "content": "- Japan:\n  - Now predicted: negative growth for 2011.\n  - Cause: disruptions from the earthquake stronger than anticipated.\n  - Outlook: expectation that problems will go away and the economy will rebound more strongly in 2012.\n- United States:\n  - Forecast revisions: down by 0.3% in 2011, and 0.2% in 2012.\n  - Interpretation: viewed as \"a bump in the road\" rather than something more worrisome.\n  - Contributing factor: effect of oil prices on disposable income; if oil prices stay broadly stable (in line with financial markets' expectations), consumer and firm spending should remain steady in a weak recovery."
    },
    {
      "heading": "Three key downside risks highlighted",
      "content": "- Risk 1 — Europe:\n  - Concern: lengthy, painful process to improve competitiveness and return to fiscal health in some countries.\n  - Required actions: fiscal consolidation, structural reforms, policies to protect the most vulnerable, and outside help/financing (official and private).\n  - Stakes: failure to implement policies or deliver financing risks disorderly financial and sovereign defaults, contagion across Europe, and potential derailment of the European and world recovery.\n- Risk 2 — Fiscal credibility in advanced countries:\n  - Concern: many countries, including the United States, lack a convincing medium term fiscal consolidation plan.\n  - Channels of harm: market worries → higher risk premia → higher borrowing costs for sovereigns and private borrowers; or precipitated fiscal adjustments → sharp decreases in demand.\n  - Outcome: in both channels, growth may be derailed.\n- Risk 3 — Emerging market overheating:\n  - Indicators: inflation increasing beyond what can be explained by commodity and food prices; high credit growth rates; some asset prices high relative to historical standards.\n  - Policy dilemmas: balancing strong domestic demand and strong capital inflows; need for appreciation in some Asian currencies and adjustment at other margins in some Latin American countries.\n  - Guidance: use the right combination of instruments — fiscal, monetary, and macro prudential — to slow economies in time and avoid costly boom-bust cycles."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- For Europe and fragile sovereigns:\n  - Implement strong policies: fiscal consolidation, structural reforms, and measures to protect the most vulnerable.\n  - Secure help and outside financing (official and private) — \"These countries cannot do it alone.\"\n- For advanced countries with fiscal gaps:\n  - Put in place convincing medium term fiscal consolidation plans to avoid higher risk premia or forced abrupt adjustments.\n- For emerging market economies:\n  - Tighten policy where needed; in some cases allow further currency appreciation and reduction of current account surplus; in others adjust through other margins if appreciation has already occurred.\n  - Employ a combination of fiscal, monetary, and macro prudential instruments to avoid overheating and boom-bust cycles.\n\nOlivier Blanchard, June 17, 2011\n\n---\n\n\n References\n\n- https://www.imf.org/wp-content/uploads/2011/04/obspring-2011-weo2.jpg\n- update\n\nSource: https://www.imf.org/en/blogs/articles/2011/06/17/global-growth-hits-a-soft-patch"
    }
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    "Authors: Olivier Blanchard",
    "Published: June 17, 2011",
    "World forecast: 4.3% growth for 2011, and 4.5% for 2012.",
    "Change versus April: down by 0.1% for 2011, and unchanged for 2012.",
    "Overall assessment: \"Despite a mild slowdown, the global economic recovery continues but the road to health will be a long one. Downside risks, both old and new, are increasing.\"",
    "Advanced economies forecast: 2.2% for 2011, and 2.6% for 2012.",
    "Emerging and developing economies forecast: 6.6% growth for 2011 and 6.4% for 2012.",
    "Japan:",
    "United States:",
    "Risk 1 — Europe:",
    "Risk 2 — Fiscal credibility in advanced countries:",
    "Risk 3 — Emerging market overheating:",
    "For Europe and fragile sovereigns:",
    "For advanced countries with fiscal gaps:",
    "For emerging market economies:",
    "[https://www.imf.org/wp-content/uploads/2011/04/ob_spring-2011-weo2.jpg](https://www.imf.org/wp-content/uploads/2011/04/ob_spring-2011-weo2.jpg)",
    "[update](http://www.imf.org/external/pubs/ft/weo/2011/update/02/index.htm)"
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