IMF World Economic Outlook, October 2014: Legacies, Clouds, Uncertainties — Table of Contents

World Economic Outlook, October 7, 2014

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Canonical URL: IMF World Economic Outlook, October 2014: Legacies, Clouds, Uncertainties — Table of Contents

Global growth forecast for this year revised downward to 3.3 percent, 0.4 percentage point lower than in the April 2014 World Economic Outlook (WEO).
Global growth projection for 2015 lowered to 3.8 percent.
After a slowdown in the first half of 2014, global growth is forecast to strengthen to 3.5 percent in the second half of 2014 and 3.8 percent in 2015.
Recovery is uneven and increasingly country specific; advanced-economy legacies of the precrisis boom and subsequent crisis (including high private and public debt) continue to weigh on recovery.

Downside risks have increased since the spring.
Short-term risks include:
- a worsening of geopolitical tensions;
- a reversal of recent risk spread and volatility compression in financial markets.
Medium-term risks include:
- stagnation and low potential growth in advanced economies;
- a decline in potential growth in emerging markets.
Specific shocks that would reduce global growth:
- production disruptions or sharply higher global oil prices—due to geopolitical tensions;
- an unexpected tightening in financial conditions owing to higher-than-expected U.S. long-term interest rates or increased risk aversion.
Over the medium term, protracted weak demand in advanced economies could result in lower growth everywhere, including through negative supply-side effects.

Raising actual and potential growth is a priority given increased risks.
Advanced economies:
- require continued support from monetary policy;
- need fiscal adjustment attuned in pace and composition to supporting both the recovery and long-term growth.
- in a number of economies, an increase in public infrastructure investment can provide short-term demand support and help boost potential output in the medium term.
Emerging markets:
- scope for macroeconomic policies to support growth varies across countries and regions;
- space is limited in countries with external vulnerabilities.
General, urgent need across advanced, emerging market, and developing economies for structural reforms to strengthen growth potential or make growth more sustainable.

Increased public infrastructure investment raises output in both the short and long term, particularly:
- during periods of economic slack;
- when investment efficiency is high.
Time is right for an infrastructure push in countries with infrastructure needs because:
- borrowing costs are low;
- demand is weak in advanced economies;
- there are infrastructure bottlenecks in many emerging market and developing economies.
Debt-financed projects could have large output effects without increasing the debt-to-GDP ratio, if clearly identified infrastructure needs are met through efficient investment.

Global current account (“flow”) imbalances have narrowed significantly since their peak in 2006, and their configuration has changed markedly.
The large U.S. deficit and surpluses in China and Japan have more than halved.
Some surpluses remain large, especially in some European economies and oil exporters; some advanced commodity exporters and major emerging market economies have moved to deficit.
The reduction of large flow imbalances has diminished systemic risks to the global economy, but two concerns remain (as discussed in the chapter).

The WEO includes:
- chapters on recent developments, prospects, and policy priorities; country and regional perspectives; public investment effects; and global imbalances;
- special features (for example, Commodity Market Developments and Forecasts, with a Focus on Natural Gas);
- extensive boxes, tables, figures, data, appendixes, and a Statistical Appendix detailing projections, assumptions, and methodology.

IMF World Economic Outlook, October 2014: Legacies, Clouds, Uncertainties — Table of Contents