Transcript Slide 1

Outlook for the World Economy and Policy
Challenges Ahead: A Multi-speed Recovery
ADDRESS BY
MURILO PORTUGAL
DEPUTY MANAGING DIRECTOR, IMF
Canberra, 2 March 2010
1
Outline


Outlook
 Global
 Asia
Policy Challenges
 Exit Policies
 Building a Stable Financial System
 Bringing Down Public Debt Levels over the
Medium Term
Across the Globe Growth is Returning, but at
Different Speeds
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(percent; quarter-over-quarter, annualized)
15
Emerging
10
World
5
Advanced
0
-5
11Q4
2005
2006
2007
2008
2009
2010
2011
-10
Growth is Likely be Slower by Past Standards in Most
Advanced Economies but Faster in EMs
2010
2011
WEO
Jan 2010
Consensus
Forecasts
1/
WEO
Jan 2010
Consensus
Forecasts
1/
World
3.9
4.0
4.3
4.2
Advanced Economies
2.1
…
2.4
…
United States
2.7
2.9
2.4
3.1
Euro area
1.0
1.3
1.6
1.6
Japan
1.7
1.3
2.2
1.5
Australia
2.5
2.9
3.0
3.2
6.0
…
6.3
…
China
10.0
9.7
9.7
9.1
India
7.7
7.8
7.8
7.9
Brazil
4.7
5.4
3.7
4.5
Russia
3.6
4.1
3.4
4.5
Emerging and Developing
Economies
1/ Consensus forecasts, Asia Pacific consensus forecasts (Jan. 11, 2010); Latin American consensus forecasts (Jan. 18,
2010); and Eastern European consensus forecasts (Jan 18, 2010). India consensus forecast on fiscal year basis.
3
Sluggish Recovery Should Keep Inflation in Check
4
Global Headline Inflation
(Percent change from a year earlier)
10
8
Emerging
6
4
World
2
Advanced
0
-2
10Q4
02
03
04
05
06
07
08
09
10
Financial Markets have Continued to
Recover and Asset Prices Have Rebounded
Asset Class Performance
(percent of pre-Lehman levels)
Pre-Lehman
to Current
-22.4
-9.3
17.4
21.7
15.0
15.7
-0.8
6.2
5
6
Sovereign Debt Supply Will Remain High
Sovereign Debt Issuance
(percent of GDP)
7
Emerging Asia is Leading the Global Recovery
G2 (US & Japan)
The Outlook for Investment is More
Mixed, but Business Confidence is up
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Commodity Prices are Rising but Upward Pressures
are Likely to Remain Moderate...
Selected Commodity Prices
(January 2002 = 100)
Energy
Metals
Beverages
Food
Agricultural
Raw Materials
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... Given Above-Average Inventories and High Spare
Capacity
10
Global Oil Demand and
OPEC-11 Spare Capacity
OECD Oil Inventories
(in days of consumption)
(million barrels per day)
4
3
Demand (annual change; LHS)
OPEC-11 Spare Capacity (RHS)
9
8
60
Demand, annual change
2
55
50
1
0
4
-1
45
-3
09Q3
00Q1
02Q1
04Q1
06Q1
08Q1
6
5
-2
40
7
3
2
1
10Q4 0
-4
2000Q1 02Q1 04Q1 06Q1 08Q1 10Q1
Spare capacity, million barrels per day
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China’s Imports of Commodities Have Helped
Australia
China: Import Volumes
(January 2007=100)
200
400
350
Capital goods (left axis)
Iron ore (left axis)
Coal (right axis)
150
300
250
200
150
100
100
50
50
Dec-09
Oct-09
Aug-09
Jun-09
Apr-09
Feb-09
Dec-08
Oct-08
Aug-08
Jun-08
Apr-08
Feb-08
Dec-07
Oct-07
Aug-07
Jun-07
Apr-07
Feb-07
0
11
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Policy Challenges Ahead


In the near term, the appropriate timing, pace,
and mode of exiting should depend on the state
of the economy and the health of the financial
sector in individual countries.
There are also medium-term challenges:

Rebalancing the sources of growth

Reforming the financial system

Bringing debt levels down to their pre-crisis level
Exit from Financial Sector Support and the New
Regulatory Framework




Exiting from support to shorter-term funding markets
and liquidity provision could be relatively easy/fast.
High degree of coordination is required to designing
and implementing financial sector reform
Avoid uneven implementation across countries
Some emerging market countries should respond to
capital inflows through a variety of measures,
including greater exchange rate flexibility
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Thank you