IMF World Economic Outlook (WEO) Update -- Mild Slowdown of the Global Expansion, and Increasing Risks, June 2011
World Economic Outlook, June 17, 2011
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- Published: June 17, 2011
- Series: World Economic Outlook
Global growth and near-term outlook
- Global activity expanded at an annualized rate of 4.3 percent in the first quarter of 2011.
- Global activity is projected to slow in the second quarter of 2011, then reaccelerate in the second half of 2011; baseline projections for 2011–12 are broadly unchanged relative to the April 2011 WEO.
- Forward-looking indicators (manufacturing purchasing managers indices) suggest activity softened in Q2 2011, especially in many advanced economies.
- Key drivers of the slowdown in Q2 2011:
- Supply disruptions from the Japanese earthquake and tsunami.
- Transitory factors in the United States, including higher commodity prices, bad weather, and supply chain disruptions.
- Earlier oil price increases cutting into households’ real incomes and dampening private consumption.
- Fundamental growth drivers remaining in place: still-accommodative macroeconomic conditions, pent-up demand for durables and investment, and strong potential growth in emerging and developing economies.
Key statistics and projections (as presented)
- Table 1 highlights (Percent change unless otherwise noted):
- World Output: 2009 = –0.5; 2010 = 5.1; 2011 = 4.3; 2012 = 4.5; Q4 over Q4 projections: 2011 = 4.7; 2012 = 4.4.
- Advanced Economies: 2009 = –3.4; 2010 = 3.0; 2011 = 2.2; 2012 = 2.6; Q4 over Q4 projections: 2011 = 2.7; 2012 = 2.3.
- United States: 2009 = –2.6; 2010 = 2.9; 2011 = 2.5; Q4 over Q4 projections: 2011 = 2.8.
- Euro Area: 2009 = –4.1; 2010 = 1.8; 2011 = 2.0; 2012 = 1.7.
- Japan: 2009 = –6.3; 2010 = 4.0; 2011 = –0.7; 2012 = –2.1.
- Emerging and Developing Economies (quarterly estimates/projections account for ~80%): 2009 = 7.4; 2010 = 6.6; 2011 = 6.4; 2012 = 7.5; Q4 over Q4 projections: 2011 = 6.9.
- Developing Asia: 2009 = 7.2; 2010 = 9.6; 2011 = 9.2; 2012 = 8.6.
- China: 2009 = 10.3; 2010 = 9.5; 2011 = 9.8; 2012 = 9.4.
- India: 2009 = 6.8; 2010 = 10.4; 2011 = 8.2; 2012 = 7.8.
- World Trade Volume (goods and services): 2009 = –10.8; 2010 = 12.4; 2011 = 6.7.
- Commodity prices (U.S. dollars): Oil — 2010 average price = $79.03 a barrel; assumed price based on futures markets = $106.30 in 2011 and $105.25 in 2012.
- Global inflation: rose from 3½ percent in Q4 2010 to 4 percent in Q1 2011.
- Regional snapshots:
- Latin America and the Caribbean: region expanded by more than 6 percent in 2010; LAC growth projected to moderate to about 4½ percent in 2011 and converge to about 4 percent over the next two years.
- Sub-Saharan Africa: activity projected to continue strengthening with robust domestic demand and benefits from elevated commodity prices.
- Middle East and North Africa: prospects clouded by political and social unrest; outlook improved for some oil and mineral exporters.
Inflation, commodities, and financial conditions
- Inflation:
- Global inflation pickup driven mainly by larger-than-expected increases in commodity prices; core inflation also rose across a number of economies.
- Among advanced economies: core inflation subdued in the United States and Japan, rose moderately in the euro area.
- Among emerging and developing economies: inflation pressures increasingly broad-based.
- Commodity markets:
- Commodity prices surged through April 2011, fell in May, and stabilized afterward.
- Crude oil prices briefly approached $120 a barrel in April 2011, fell sharply in May, and then averaged about $107 a barrel (close to April 2011 WEO assumptions).
- Food prices stabilized beginning in early 2011 after weather-related supply shocks in 2010.
- Financial volatility:
- Global financial conditions became more volatile since late May 2011, reflecting market concerns about sovereign risks in the euro area periphery and softening U.S. activity.
- Symptoms: rising sovereign credit default swap spreads in certain euro area economies, retreating global equity prices, and falling long-term bond yields in major advanced economies.
- June 2011 GFSR Market Update emphasizes insufficient pace of banking system repair (notably in Europe) and risks related to releveraging in market segments.
- For many emerging and developing economies, the financial environment remained accommodative but capital inflows were fickle; some large emerging economies experienced rapid credit growth while others tightened monetary policy.
Risks and scenarios
- Balance of risks is tilted to the downside relative to April 2011 WEO.
- Elevated downside risks include:
- Spillovers from further deterioration in market confidence in the euro area periphery.
- Setbacks to the U.S. recovery.
- Reversal of capital inflows to emerging economies if global financial conditions tighten.
- Banks in advanced economies face large near-term refinancing needs; a squeeze on wholesale funding could tighten lending standards.
- Near-term risks from sharper or more prolonged negative spillovers from Japan.
- Commodity-related risks:
- Risks for commodity markets are smaller than in April 2011 but still point down for growth; unrest in the Middle East may raise oil prices; low inventories and weather risks pose near-term upside risks for food prices.
- Emerging-market overheating risks:
- Elevated inflation pressures and high asset prices in some key emerging economies increase the risk of hard landings if policy rates remain low.
Policy recommendations and priorities
- Advanced economies:
- Implement credible and well-paced consolidation programs focused on bolstering medium-term debt sustainability—especially the United States and Japan.
- For the United States: immediately address the debt ceiling and launch a deficit reduction plan that includes entitlement reform and revenue-raising tax reform; if recovery weakens, modify the pace of adjustment within the envelope of a credible medium-term plan.
- For Japan: make progress in tax and entitlement reforms to address debt dynamics; ensure fiscal response to the earthquake is consistent with medium-term sustainability.
- Address financial sector vulnerabilities—particularly in several European economies—through ambitious structural reforms to boost competitiveness, front-loaded fiscal adjustment, and balance sheet repair; strengthen EU-wide supervision and crisis resolution and make the safety net more flexible.
- Maintain accommodative monetary policy where sizable slack exists (United States, Japan, euro area), while guarding against further increases in core inflation as slack diminishes; accommodative monetary policy should not substitute for financial sector repair.
- Use macroprudential policies and stronger financial supervision to contain risks from prolonged low interest rates.
- Emerging and developing economies:
- Expeditiously tighten macroeconomic policies where economies are operating at or above precrisis output levels.
- Use exchange rate flexibility and macroprudential tools, possibly including capital controls, to contain boom-bust risks; continue policy tightening coordinated with transparent central bank communication to anchor inflation expectations.
- Rebuild fiscal buffers in economies with high fiscal deficits or debt; preserve social sector spending and priority infrastructure investment.
- For economies with excessive current account surpluses (particularly in Asia): pursue demand rebalancing through exchange rate appreciation and structural reforms to secure balanced growth and employment gains in the medium term.
- Latin America and the Caribbean (region-specific guidance):
- With output gaps largely closed, remove macroeconomic policy accommodation.
- Reduce the pace of government spending to avoid overburdening monetary policy amid sizable capital inflows and currency appreciation.
- Strengthen macroprudential measures and consider capital controls to enhance financial-system resilience.
- In Central America: rebuild policy buffers used during the global recession.
- In the Caribbean: continue fiscal consolidation where public debt is very high to ensure stability and sustainable growth.
IMF World Economic Outlook Update — Mild Slowdown of the Global Expansion, and Increasing Risks, June 2011
Content in this bundle
- Fig01
- Figure 2. Recent Economic Indicators
- Figure 3. Recent Financial Market Developments
- Figure 4. Net Flows to Emerging Market Funds
- Figure 5. Real Credit Growth
- Figure 6. Commodity Price Indices
- Figure 7. Pace of Monetary Policy Tightening in Emerging Economies
- مستجدات آفاق الاقتصاد العالمي ;يونيو 2011
- 世界经济展望最新预测，2011年6月——全球增长略微放慢，风险正在增加
- 0611f
- 世界経済成長は緩やかに減速、リスクは拡大
- FIG01
- FIG02
- FIG03
- FIG04
- FIG05
- FIG06
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- _0611pdf
- Бюллетень «Перспектив развития мировой экономики», июнь 2011 года
- 0611s
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