World Economic Outlook, October 2013: October 2013, transitions and tensions

Description

Global growth is in low gear, and the drivers of activity are changing. These dynamics raise new policy challenges. Advanced economies are growing again but must continue financial sector repair, pursue fiscal consolidation, and spur job growth. Emerging market economies face the dual challenges of slowing growth and tighter global financial conditions. This issue of the World Economic Outlook examines the potential spillovers from these transitions and the appropriate policy responses. Chapter 3 explores how output co-movements are influenced by policy and financial shocks, growth surprises, and other linkages. Chapter 4 assesses why certain emerging market economies were able to avoid the classical boom-and-bust cycle in the face of volatile capital flows during the global financial crisis. Cover Contents Assumptions and Conventions Further Information and Data Preface Foreword Executive Summary Chapter 1. Global Prospects and Policies Growth Dynamics Further Diverge External Sector Developments Policy Challenges Rebalancing Global Demand Special Feature: Commodity Market Review Box 1.SF.1. Energy Booms and the Current Account: Cross-Country Experience Box 1.SF.2. Oil Price Drivers and the Narrowing WTI-Brent Spread Box 1.1. Taper Talks: What to Expect when the United States Is Tightening Box 1.2. What Explains the Slowdown in the BRICS? Box 1.3. External Rebalancing in the Euro Area Box 1.4. Abenomics: Risks after Early Success? References Chapter 2. Country and Regional Perspectives The United States and Canada: A Modest Recovery Europe: Supporting the Fledgling Recovery Asia: A Lower Growth Trajectory Latin America and the Caribbean: Growth Is Subdued Commonwealth of Independent States: Slower Growth amid Weak External and Internal Demand Middle East, North Africa, Afghanistan, and Pakistan: Growth Hinges on Improvements in Oil Production and Confidence Sub-Saharan Africa: Continued Dynamism Reference Chapter 3. Dancing Together? Spillovers, Common Shocks, and the Role of Financial and Trade Linkages Output Comovements: Conceptual Framework and Stylized Facts The Role of Common Shocks and Financial and Trade Linkages Spillovers of Country-Specific Shocks to Other Countries and the Role of Financial and Trade Linkages Summary and Implications for the Outlook Appendix 3.1. Data Definitions, Sources, and Country Groupings Appendix 3.2. Multiperiod Comovement Regressions Appendix 3.3. Growth Regressions Box 3.1. Output Synchronicity in the Middle East, North Africa, Afghanistan, and Pakistan and in the Caucasus and Central Asia Box 3.2. Spillovers from Changes in U.S. Monetary Policy References Chapter 4. The Yin and Yang of Capital Flow Management: Balancing Capital Inflows with Capital outflows Financial Adjustment and Resilience How Are the More Resilient Economies Different? Case Studies Overall Analysis Conclusions Box 4.1. Simulating Vulnerability to International Capital Market Conditions References Annex: IMF Executive Board Discussion of the outlook, September 2013 Statistical Appendix Assumptions What’s New Data and Conventions Classification of Countries General Features and Composition of Groups in the World Economic Outlook Classification Table A. Classification by World Economic Outlook Groups and Their Shares in Aggregate GDP, Exports of Goods and Services, and Population, 2012 Table B. Advanced Economies by Subgroup Table C. European Union Table D. Emerging Market and Developing Economies by Region and Main Source of Export Earnings Table E. Emerging Market and Developing Economies by Region, Net External Position, and Status as Heavily Indebted Poor Countries Table F. Key Data Documentation Box A1. Economic Policy Assumptions Underlying the Projections for Selected Economies List of Tables Output (Tables A1–A4) Table A1. Summary of World Output Table A2. Advanced Economies: Real GDP and Total Domestic Demand Table A3. Advanced Economies: Components of Real GDP Table A4. Emerging Market and Developing Economies: Real GDP Inflation (Tables A5–A7) Table A5. Summary of Inflation Table A6. Advanced Economies: Consumer Prices Table A7. Emerging Market and Developing Economies: Consumer Prices Financial Policies (Table A8) Table A8. Major Advanced Economies: General Government Fiscal Balances and Debt Foreign Trade (Table A9) Table A9. Summary of World Trade Volumes and Prices Current Account Transactions (Tables A10–A12) Table A10. Summary of Balances on Current Account Table A11. Advanced Economies: Balance on Current Account Table A12. Emerging Market and Developing Economies: Balance on Current Account Balance of Payments and External Financing (Tables A13–A14) Table A13. Emerging Market and Developing Economies: Net Financial Flows Table A14. Emerging Market and Developing Economies: Private Financial Flows Flow of Funds (Table A15) Table A15. Summary of Sources and Uses of World Savings Medium-Term Baseline Scenario (Table A16) Table A16. Summary of World Medium-Term Baseline Scenario World Economic Outlook Selected Topics Tables Table 1.1. Overview of the World Economic Outlook Projections Table 1.SF.1. First-Round Trade Balance Impact from Changes in Commodity Prices Table 1.SF.2. Temporary Oil Price Shock Impact on GDP and Current Accounts: Scenarios 1, 2, and 3 Table 1.1.1. Real GDP Growth Table 1.2.1. The Slowdown of Real and Potential Growth in the BRICS Table 1.2.2. Five-Year-Ahead Forecast Growth and Average Growth from 1998–2013 in the BRICS Table 2.1. Selected Advanced Economies: Real GDP, Consumer Prices, Current Account Balance, and Unemployment Table 2.2. Selected European Economies: Real GDP, Consumer Prices, Current Account Balance, and Unemployment Table 2.3. Selected Asian Economies: Real GDP, Consumer Prices, Current Account Balance, and Unemployment Table 2.4. Selected Western Hemisphere Economies: Real GDP, Consumer Prices, Current Account Balance, and Unemployment Table 2.5. Commonwealth of Independent States: Real GDP, Consumer Prices, Current Account Balance, and Unemployment Table 2.6. Selected Middle East and North African Economies: Real GDP, Consumer Prices, Current Account Balance, and Unemployment Table 2.7. Selected Sub-Saharan African Economies: Real GDP, Consumer Prices, Current Account Balance, and Unemployment Table 3.1. Financial Linkages and International Comovement—Two Periods Table 3.2. Spillover Effects Identified via Financial and Trade Linkages Table 3.3. Data Sources Table 3.4. Economy Groups Table 3.5. Multiperiod Financial Linkages and International Comovement Online Tables Table B1. Advanced Economies: Unemployment, Employment, and Real GDP per Capita Table B2. Emerging Market and Developing Economies: Real GDP Table B3. Advanced Economies: Hourly Earnings, Productivity, and Unit Labor Costs in Manufacturing Table B4. Emerging Market and Developing Economies: Consumer Prices Table B5. Summary of Fiscal and Financial Indicators Table B6. Advanced Economies: General and Central Government Net Lending/Borrowing and Excluding Social Security Schemes Table B7. Advanced Economies: General Government Structural Balances Table B8. Emerging Market and Developing Economies: General Government Net Lending/ Borrowing and Overall Fiscal Balance Table B9. Emerging Market and Developing Economies: General Government Net Lending/ Borrowing Table B10. Advanced Economies: Exchange Rates Table B11. Emerging Market and Developing Economies: Broad Money Aggregates Table B12. Advanced Economies: Export Volumes, Import Volumes, and Terms of Trade in Goods and Services Table B13. Emerging Market and Developing Economies by Region: Total Trade in Goods Table B14. Emerging Market and Developing Economies by Source of Export Earnings: Total Trade in Goods Table B15. Advanced Economies: Current Account Transactions Table B16. Emerging Market and Developing Economies: Balances on Current Account Table B17. Emerging Market and Developing Economies by Region: Current Account Transactions Table B18. Emerging Market and Developing Economies by Analytical Criteria: Current Account Transactions Table B19. Summary of Balance of Payments, Financial Flows, and External Financing Table B20. Emerging Market and Developing Economies by Region: Balance of Payments and External Financing Table B21. Emerging Market and Developing Economies by Analytical Criteria: Balance of Payments and External Financing Table B22. Summary of External Debt and Debt Service Table B23. Emerging Market and Developing Economies by Region: External Debt by Maturity and Type of Creditor Table B24. Emerging Market and Developing Economies by Analytical Criteria: External Debt, by Maturity and Type of Creditor Table B25. Emerging Market and Developing Economies: Ratio of External Debt to GDP Table B26. Emerging Market and Developing Economies: Debt-Service Ratios Table B27. Emerging Market and Developing Economies, Medium-Term Baseline Scenario: Selected Economic Indicators Figures Figure 1.1. Global Growth Figure 1.2. Global Activity Indicators Figure 1.3. GDP Growth Forecasts Figure 1.4. Monetary Conditions in Advanced Economies Figure 1.5. Fiscal Policies Figure 1.6. Global Inflation Figure 1.7. Overheating Indicators for the G20 Economies Figure 1.8. Financial Market Conditions Figure 1.9. Capital Flows Figure 1.10. Exchange Rates and Reserves Figure 1.11. Financial Conditions in Emerging Markets since May 2013 Figure 1.12. Capacity and Credit in Emerging Market Economies Figure 1.13. Real GDP Projections: Past and Current Figure 1.14. Global Trade and Imbalances Figure 1.15. Risks to the Global Outlook Figure 1.16. Recession and Deflation Risks Figure 1.17. Plausible Downside Scenario Figure 1.18. Rebalancing Scenario Figure 1.SF.1. IMF Commodity Price Indices Figure 1.SF.2. Commodity Prices and Emerging Market Economic Activity Figure 1.SF.3. Trade Balance Impacts of Energy and Metal Price Declines Figure 1.SF.4. Illustrative Impact of Chinese Demand Slowdown on Commodity Exporters Figure 1.SF.5. Balance of Risks Figure 1.SF.6. U.S. Oil and Gas Production Projections Figure 1.SF.7. Medium-Term Impact of U.S. Energy Boom Figure 1.SF.8. Natural Gas and Oil Prices in the United States and Germany Figure 1.SF.1.1. Giant Oil and Gas Discoveries and the Current Account Figure 1.SF.2.1. WTI–Brent Price Differentials Figure 1.SF.2.2. Brent SVAR Historical Decomposition Figure 1.SF.2.3.WTI–Brent Differential Historical Decomposition Figure 1.1.1. U.S. Growth and Financial Indicators Figure 1.1.2. Global Economic and Financial Conditions during U.S. Monetary Policy Tightening Figure 1.1.3. Gross Capital Inflows to Emerging Markets Figure 1.2.1. Real GDP Growth Figure 1.2.2. Composition of 2011–13 Growth Changes Figure 1.2.3. World Export Growth, U.S. Real Interest Rate, and Commodity Prices Figure 1.3.1. Developments in External Balance Figure 1.3.2. Cumulative Unit Labor Cost Adjustment Figure 1.3.3. Export Performance and External Adjustment Figure 1.4.1. Inflation Expectations Figure 1.4.2. Effect of Abenomics under Various Scenarios Figure 2.1. The Effects of a Plausible Downside Scenario Figure 2.2. United States and Canada: 2013 GDP Growth Forecasts Figure 2.3. United States and Canada: A Modest Recovery Figure 2.4. Europe: 2013 GDP Growth Forecasts Figure 2.5. Advanced Europe: Abating Tail Risks, but Prolonged Stagnation Figure 2.6. Emerging Europe: Growth Continues despite Increased Financial Volatility Figure 2.7. Asia: 2013 GDP Growth Forecasts Figure 2.8. Asia: A Lower Growth Trajectory Figure 2.9. Latin America and the Caribbean: 2013 GDP Growth Forecasts Figure 2.10. Latin America: Growth Is Subdued Figure 2.11. Commonwealth of Independent States: 2013 GDP Growth Forecasts Figure 2.12. Commonwealth of Independent States: Slower Growth amid Weak External and Internal Demand Figure 2.13. Middle East, North Africa, Afghanistan, and Pakistan: 2013 GDP Growth Forecasts Figure 2.14. Middle East, North Africa, Afghanistan, and Pakistan: Growth Hinges on Improvements in Oil Production and Confidence Figure 2.15. Sub-Saharan Africa: 2013 GDP Growth Forecasts Figure 2.16. Sub-Saharan Africa: Continued Dynamism Figure 3.1. The Evolution of Output Comovements, 2004–12 Figure 3.2. Output Comovements: 1978–2012 Figure 3.3. Output Comovements: Back to Precrisis Levels? Figure 3.4. What’s Behind “Common Shocks”? Figure 3.5. Growth Surprises in the United States, Euro Area, and China and their Impact on Growth in Other Countries Figure 3.6. Peak Impact of Growth Disappointments on Other Regions Figure 3.7. Cross-Border Impact of Financial Shocks Figure 3.8. Impact of U.S. and Euro Area Financial Shocks Figure 3.9. Cross-Border Impact of Policy Shocks Figure 3.10. Peak Impact of Fiscal Policy Shocks on Other Regions Figure 3.11. Cross-Border Impact of Monetary Policy Shocks on Industrial Production Figure 3.12. Peak Impact of Monetary Policy Shocks on Other Regions Figure 3.13. Impact of U.S. Credit Supply Shocks Figure 3.14. Comparison of Various Output Comovement Measures Figure 3.15a. Growth Surprise Shocks Figure 3.15b. Financial Shocks Figure 3.15c. Policy Shocks Figure 3.16a. Cross-Border Impact of Growth Surprises in the United States, Euro Area, and China on Growth in Other Countries Figure 3.16b. Cross-Border Impact of Growth Surprises in the United States and Euro Area on Growth in Other Countries Figure 3.16c. Cross-Border Impact of Fiscal Policy Shocks on Growth in Other Countries Figure 3.16d. Cross-Border Impact of Monetary Policy Shocks on Growth in Other Countries Figure 3.17. Cross-Border Output Impact of Tax- versus Spending-Based Shocks Figure 3.1.1. Output Comovements between MCD Groups and External Partners Figure 3.1.2. Output Comovements in Middle East and Central Asia Country Groups Figure 3.2.1. Impact of Monetary Policy Shocks Figure 3.2.2. Monthly Percent Increase on Short-Term Rates Figure 3.2.3. Response to Federal Funds Rate Shocks Figure 3.2.4. The Exchange Rate Response to Federal Funds Rate Surprises Figure 3.2.5. Monetary Policy Autonomy Figure 4.1. Gross Capital Inflows Figure 4.2. Current Account, GDP, Consumption, and Unemployment Figure 4.3. Policies and Institutions Figure 4.4. External Financial Integration Figure 4.5. Economic Structure and Reserves Figure 4.6. Chile Figure 4.7. Malaysia Figure 4.8. The Czech Republic Figure 4.1.1. Responses to Changes in International Capital Market Conditions