{ "title": "Global Economy Faces Strong and Complex Cross Currents", "publication": "IMF Blog, January 19, 2015", "sourceUrl": "https://www.imf.org/en/blogs/articles/2015/01/19/global-economy-faces-strong-and-complex-cross-currents", "canonical": "https://www.imf.org/en/blogs/articles/2015/01/19/global-economy-faces-strong-and-complex-cross-currents", "overlayPath": "/en/blogs/articles/2015/01/19/global-economy-faces-strong-and-complex-cross-currents/index.md", "summary": "The world economy is experiencing strong and complex cross currents: major economies benefit from the decline in the price of oil, while lower long run prospects in many regions are weakening demand.", "sections": [ { "heading": "Overview", "content": "- The world economy is experiencing strong and complex cross currents: major economies benefit from the decline in the price of oil, while lower long run prospects in many regions are weakening demand.\n- World Economic Outlook Update (released in Beijing) projects:\n - Global growth in 2015 is 3.5%, 0.3% higher than global growth in 2014, but 0.3% less than the forecast in October.\n - Global growth in 2016 is forecast at 3.7%, a downward revision from the last World Economic Outlook." }, { "heading": "Oil price effects", "content": "- Recent price movement:\n - The price of oil declined from about 100 dollars a barrel in June to less than 50 dollars today.\n - The decline appears largely due to an unexpected change in OPEC strategy: maintaining OPEC supply despite increasing non OPEC supply and weakening global demand.\n - Expectation: much but not all of the price decline to be persistent.\n- Effects on oil importers:\n - Price decline increases real income and decreases firms' production costs, leading to more spending.\n - Numerical illustration: if oil consumption equals 3% of GDP, a 50% drop reflects an increase in real income of 1.5%.\n - Lower inflation resulting from the decline is a concern in an environment of too low inflation and central banks’ policy rates close to zero.\n - Net assessment: for oil importers the effect is strongly positive.\n- Effects on oil exporters and energy firms:\n - Persistent price decreases imply oil exporters will need to reduce government spending.\n - Those with substantial buffers or flexible exchange rates can adjust more slowly; others may need more dramatic adjustments.\n - Adverse effects on Russia and Nigeria are likely to be very large.\n - Some energy firms may face financial risks; systemic risks from country or corporate defaults appear limited." }, { "heading": "Exchange rate movements and implications", "content": "- Since August:\n - The dollar has appreciated in real terms by 7%.\n - The euro has depreciated by 3%.\n - The yen has depreciated by 10%.\n- Implications:\n - Dollar appreciation may slow the US recovery but is seen as a welcome adjustment.\n - Appreciation should boost demand in the euro area and Japan and may help them out of slump." }, { "heading": "Country and regional outlook", "content": "- Divergence among advanced economies for 2015:\n - United States growth revised up to 3.6%.\n - Euro area growth revised down to 1.2%.\n - Japan growth revised down to 0.6%.\n- Emerging markets and regions:\n - Large downward revisions in Sub-Saharan Africa, the economies of the Commonwealth of Independent States (CIS), and Latin America.\n - Smaller downward revisions in Emerging Asia, where growth remains very high, particularly in leading economies like India and China.\n- Country-specific notes:\n - Japan: 2014 disappointment; sustained growth requires more private demand in the short run and higher potential growth in the medium run; structural reform impetus remains too weak.\n - Russia: suffering from uncertainty, poor investment climate, sanctions, and lower oil prices.\n - China: gradual decrease in growth to below 7% in 2015 reflects a deliberate reorientation toward consumption and away from real estate and shadow banking; this lower growth affects the rest of Asia.\n - Effects of commodity price declines since 2011 are lowering growth prospects in Latin America and sub-Saharan Africa." }, { "heading": "Risks and policy implications", "content": "- Downside risks:\n - Stagnation in the Euro area and in Japan is the most obvious downside risk.\n - Risks of turmoil from increases in short rates in the United States are present but limited.\n - Some corporates in emerging markets indebted in dollars could be vulnerable to a strong dollar and weak earnings from low commodity prices.\n- Policy priorities:\n - For advanced economies at risk of stagnation (Euro area, Japan): use the \"three arrows\"—monetary policy, fiscal policy, and structural policies.\n - For oil exporters: reduce spending if price declines persist; pace depends on buffers and exchange rate flexibility.\n - For oil importers: benefits from lower oil prices can act like a significant fiscal expansion, but low inflation near zero policy rates requires monitoring.\n- Systemic risk assessment:\n - While some corporate and country financial strains are expected, systemic risks from defaults appear limited." }, { "heading": "Concluding assessment and scenarios", "content": "- The forecast is slightly pessimistic relative to potential upside from the oil price decline:\n - The decline in oil prices may provide a stronger “shot in the arm” than is implicit in current forecasts.\n - Possibility: forecasts may prove too pessimistic when reassessed in the spring.\n\nSource: Olivier Blanchard, \"Global Economy Faces Strong and Complex Cross Currents\", January 19, 2015.\n\n---\n\n\n References\n\n- oil\n- World Economic Outlook Update\n- last\n- Latin America’s\n- Russia\n- China\n- Hear\n- Watch\n- Infographic\n\nSource: https://www.imf.org/en/blogs/articles/2015/01/19/global-economy-faces-strong-and-complex-cross-currents" } ], "bullets": [ "[Markdown version](/en/blogs/articles/2015/01/19/global-economy-faces-strong-and-complex-cross-currents/index.md)", "[Structured JSON version](/en/blogs/articles/2015/01/19/global-economy-faces-strong-and-complex-cross-currents/index.json)", "[Bundle manifest](/en/blogs/articles/2015/01/19/global-economy-faces-strong-and-complex-cross-currents/bundle-manifest.json)", "Authors: Olivier Blanchard", "Published: January 19, 2015", "The world economy is experiencing strong and complex cross currents: major economies benefit from the decline in the price of oil, while lower long run prospects in many regions are weakening demand.", "World Economic Outlook Update (released in Beijing) projects:", "Recent price movement:", "Effects on oil importers:", "Effects on oil exporters and energy firms:", "Since August:", "Implications:", "Divergence among advanced economies for 2015:", "Emerging markets and regions:", "Country-specific notes:", "Downside risks:", "Policy priorities:", "Systemic risk assessment:", "The forecast is slightly pessimistic relative to potential upside from the oil price decline:", "[oil](http://blogs.imf.org/2014/12/22/seven-questions-about-the-recent-oil-price-slump/)", "[World Economic Outlook Update](http://www.imf.org/external/pubs/ft/weo/2015/update/01/index.htm)", "[last](http://www.imf.org/external/pubs/ft/survey/so/2014/NEW100714A.htm)", "[Latin America’s](http://www.imf.org/external/pubs/ft/survey/so/2014/car101014c.htm)", "[Russia](http://www.imf.org/external/np/ms/2014/100114.htm)", "[China](http://www.imf.org/external/pubs/ft/survey/so/2014/car073014a.htm)", "[Hear](http://www.imf.org/external/pubs/ft/survey/so/SinglePodcastHighlight.aspx?podcastid=333)", "[Watch](http://www.imf.org/external/mmedia/view.aspx?vid=3995314733001)", "[Infographic](http://www.imf.org/external/pubs/ft/weo/2015/update/01/info.htm)" ], "alternates": { "markdown": "/en/blogs/articles/2015/01/19/global-economy-faces-strong-and-complex-cross-currents/index.md", "json": "/en/blogs/articles/2015/01/19/global-economy-faces-strong-and-complex-cross-currents/index.json", "bundleManifest": "/en/blogs/articles/2015/01/19/global-economy-faces-strong-and-complex-cross-currents/bundle-manifest.json" }, "generatedAtUtc": "2026-08-28T18:40:52.549Z" }