World Faces Weak Economic Recovery

The global recovery continues, but the recovery is weak; indeed a bit weaker than we forecast in April, says IMF Chief Economist Olivier Blanchard. In the Euro zone, growth is close to zero, reflecting positive but low growth in the core countries, and negative growth in most periphery countries. In the United States, growth is positive, but too low to make a serious dent to unemployment. Growth has also slowed in major emerging economies, from China to India and Brazil.

India: Linked or De-linked from the Global Economy?

With economic growth expected to continue at a reasonably good clip this year and next, it’s all too easy to think there’s not much to worry about. Even as Diwali celebrations begin across India, the outlook for the world economy is fairly uneven and uncertain. More worrisome than the subdued global growth outlook, risks are building up especially in Europe—and these include an extreme scenario with financial disruption. Although India’s economy has generally been less prone to external forces than many others, we still need to contend with the larger than typical risks in the global economy. These risks harken the need for a new wave of reforms. What does the more somber darker global outlook mean for India? And exactly what policies are needed?

Growing Pains: Europe’s Dilemma

By Bas Bakker

(Versions in Español and Français )

As the crisis in Europe deepens, it is worth asking how it all went wrong in the first place. In the past decade there have been stark differences in per capita GDP growth in Europe. Growth rates have ranged from close to zero in Italy and Portugal to more than 4 percent in the best performers. Why do some countries in Europe grow much faster than others? And how can those falling behind catch up before it is too late?

In part, these differences reflect “convergence”. It is much easier for poor countries to grow faster than it is for rich countries because they can import technology they do not already have. It is much more difficult to grow fast if you are already rich and at the technology frontier—now you can only get richer by innovation.

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Fiscal Glass is Half Full: Some Reasons for Optimism

In the midst of jittery financial markets, and global economic doom and gloom, it’s easy to become pessimistic. Public debt and fiscal deficits in many advanced economies remain very high. Nevertheless, important progress has been made in fiscal adjustment—the fiscal outlook in most countries is stronger than we expected two years ago. So to the pessimists I say, don’t lose sight of what’s been achieved. But, to the optimists (if there are any) I say, don’t underestimate what still needs to be done. The task that policymakers face is complicated. They need to ensure the public sector is not a source of instability by committing to a plan that will stabilize and then bring down public debt. At the same time, they need to make sure that fiscal tightening itself does not undermine the recovery.

Keeping Asia from Overheating

Asia’s vigorous pace of growth has seen the region play a leading role in the global recovery. But there are signs that higher commodity prices are spilling over to a more generalized increase in inflation. Expectations of future inflation have picked up. And accommodative macroeconomic policy stances, coupled with limited slack in some economies, have added to inflation pressures. Against this backdrop, the need for policy tightening in Asia has become more pressing than it was six months ago, especially in economies that face generalized inflation pressures. How should policymakers address these challenges?

By | May 19th, 2011|Asia, Economic outlook, IMF, International Monetary Fund|5 Comments

The Next Phase of Asia’s Economic Growth

As the economic recovery has matured across much of Asia, the region has continued to be a driving force in the strengthening global recovery. Yet, recent tragic events—around the globe, and the earthquake and tsunami in Japan—are an all too poignant reminder of the fragility of our economic circumstances and, indeed, life. Much of this weighs on my mind as I am here in Hong Kong to launch our April 2011 Regional Economic Outlook: Asia and Pacific. While the outlook is by no means gloomy, policies will need to tackle new downside risks that have emerged and how to manage the next phase of Asia’s growth.

By | April 28th, 2011|Asia, Economic outlook, Emerging Markets, International Monetary Fund|Comments Off on The Next Phase of Asia’s Economic Growth

Shifting Gears: Where the Rubber Meets the Fiscal Road

Undertaking a sizable fiscal adjustment is a lot like driving up a tall mountain: it’s hard work, it can take a long time, and you don’t want to run out of fuel partway up the incline. Countries are starting the climb, cutting back government deficits and debt levels, but according to our analysis often current plans aren’t enough to get countries where they need and want to go. The plans in place are large by historical standards, which brings with it difficult choices, and particular risks and uncertainties. Let me fill you in on what these are.

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