## IMF Survey : Global Growth Disappoints, Pace of Recovery Uneven and Country-Specific

_IMF News, October 7, 2014_

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## Bibliographic details
- Published: October 7, 2014

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### Overview
- A weak and uneven global economic recovery continues, with the pace of recovery reflecting various country-specific conditions, according to the IMF’s World Economic Outlook (WEO).
- Investment has been weaker than expected for some time, contributing to “global growth is still mediocre,” says Olivier Blanchard, Economic Counsellor and head of the IMF’s Research Department.
- Two underlying forces weigh on global recovery: legacies of the precrisis boom and subsequent recession in advanced economies (notably high debt burdens and unemployment), and adjustments to lower potential growth in several emerging markets.

### World Economic Outlook forecasts
- Global growth: 3.3 percent in 2014 and 3.8 percent in 2015.
- The weaker-than-expected outlook for 2014 reflects setbacks to economic activity in the advanced economies during the first half of 2014, and a less optimistic outlook for several emerging market economies.
- Potential growth rates are being revised down, affecting confidence, demand, and growth today.

### Growth prospects in advanced economies
- Aggregated forecast: growth to rise to 1.8 percent in 2014 and 2.3 percent in 2015.
- United States: projected faster growth following a temporary setback in the first quarter of 2014; employment growth strong and household balance sheets improved amid favorable financial conditions and a recovering housing market.
- Euro area: recent growth disappointments highlight lingering fragilities; a gradual, but weak recovery is projected, supported by a sharp compression in interest spreads for stressed economies and record-low long-term interest rates in core euro area economies.
- Japan: GDP contracted more than expected in the second quarter of 2014 following an increase in the consumption tax; private investment is forecast to recover and growth to remain broadly stable in 2015.

### Emerging market and developing economies
- Aggregate forecast: growth at 4.4 percent for 2014 (a bit weaker than in the April 2014 WEO).
- Drivers of slowdown: lackluster domestic demand and the impact of increasing geopolitical tensions, especially on Russia and neighboring countries.
- Regional and country specifics:
  - China: growth expected to decline slightly in 2014-15 to 7.4 percent, as the economy transitions to a more sustainable path.
  - Emerging and developing Asia: growth expected to remain strong elsewhere in the region.
  - Latin America: growth rate forecast to decrease by half this year, to around 1.3 percent, due to declining exports and domestic constraints; growth expected to rebound to around 2.2 percent in 2015.
  - Sub-Saharan Africa: stronger growth expected because of supportive external demand conditions and strong investment demand, although prospects vary across countries.
  - Middle East and North Africa: recovery remains fragile; growth expected to start picking up modestly on the back of improving domestic security conditions and improving external demand.
  - Russia and other economies of the Commonwealth of Independent States: modest improvements in activity expected based on similar considerations.

### Considerable downside risks
- The October WEO emphasizes increased downside risks—both short and medium term—that could dent global confidence and growth:
  - Heightened geopolitical risks could prove more persistent or worsen, potentially causing sharply higher fuel prices, trade disruptions, and further economic distress.
  - Easy financial conditions and the resulting search for yield could fuel financial excess; markets may have underpriced risks by not fully internalizing uncertainties around the global outlook. A larger-than-expected increase in U.S. long-term interest rates, geopolitical events, or major growth disappointments could trigger widespread disruption.
  - In advanced economies, secular stagnation (a situation of a persistent shortfall of investment relative to saving, even with near-zero interest rates) and low potential growth remain important medium-term risks. Protracted low inflation or outright deflation, particularly in the euro area, could pose a risk to activity and debt sustainability in some countries.

### Policy recommendations and raising potential
- Avoid prematurely normalizing monetary policy in advanced economies.
- Fiscal adjustment should be tuned in both pace and composition to support the recovery and lay the groundwork for long-term growth and jobs.
- Increase public infrastructure investment where there are clearly identified infrastructure gaps and efficient public investment processes (example needs cited include structure maintenance/upgrading in United States and Germany).
- Emerging market scope to use macroeconomic policies to support growth varies and is more limited in countries with external vulnerabilities; they also need to prepare for monetary policy normalization in the United States and possible shifts in financial market sentiment.
- Urgent need for country-specific structural reforms across both advanced and emerging market countries to strengthen potential growth or make growth more sustainable, including:
  - Improving labor and product markets (e.g., reforms to lower the costs of hiring on regular employment contracts and facilitating greater labor force participation in many advanced European economies and Japan).
  - Easing barriers to doing business and investment in services.
- Emphasize identifying which structural reforms are most needed and politically feasible, and reestablishing confidence through clear plans to address both crisis legacies and the challenge of low potential growth.

### Key statistics and dated references
- Global growth: 3.3 percent in 2014; 3.8 percent in 2015.
- Global growth (alternate mention): 3.3 percent in 2014—unchanged from 2013.
- Advanced economies aggregate: 1.8 percent in 2014; 2.3 percent in 2015.
- Emerging market and developing economies aggregate: 4.4 percent for 2014.
- China: 7.4 percent in 2014-15.
- Latin America: around 1.3 percent in 2014; around 2.2 percent in 2015.
- Time references: first half of 2014; second quarter of 2014; October WEO; April 2014 WEO; 2015.

*Source: IMF Survey : Global Growth Disappoints, Pace of Recovery Uneven and Country-Specific (October 7, 2014).*

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## References

- [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus)
- [PRESS CENTER](http://presscenter.imf.org/)
- [In The News](https://www.imf.org/en/news/search)
- [Blanchard blog](http://blog-imfdirect.imf.org/2014/10/07/legacies-clouds-and-uncertainties/)
- [Watch Blanchard video](http://www.imf.org/external/mmedia/view.aspx?vid=3823530875001)
- [Blog: infrastructure](http://blog-imfdirect.imf.org/2014/09/30/now-is-a-good-time-to-invest-in-infrastructure/)
- [Video: New roads boost output](http://www.imf.org/external/mmedia/view.aspx?vid=3811542826001)
- [Lagarde speech](http://www.imf.org/external/pubs/ft/survey/so/2014/NEW100214A.htm)
- [report](http://www.imf.org/external/pubs/ft/weo/2014/02/index.htm)
- [United States](http://www.imf.org/external/pubs/ft/survey/so/2014/new072314a.htm)
- [euro area](http://www.imf.org/external/pubs/ft/survey/so/2014/car071414a.htm)
- [Japan](http://www.imf.org/external/pubs/ft/survey/so/2014/car073114a.htm)
- [China](http://www.imf.org/external/pubs/ft/survey/so/2014/CAR073014A.htm)
- [public infrastructure investment](http://www.imf.org/external/pubs/ft/survey/so/2014/RES093014A.htm)
- [emerging market economies](http://www.imf.org/external/pubs/ft/survey/so/2014/pol061214a.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/sonew100714a_