Transcript World Economic Situation and Prospects Mid-2009

LINK GEO
&
United Nations
World Economic
Situation and Prospects
2009-2010
Update May 2009
Rob Vos
United Nations
www.un.org/esa/policy
Main messages
1.
2.
3.
4.
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•
•
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Severest crisis since Great Depression:
World economy will shrink by 2.6% in 2009
Systemic crisis
Synchronized downturn
Led by developed countries, but emerging economies and other
developed countries hard hit
Some see “green shoots”, but none signal recovery as yet
Rising unemployment, setbacks in poverty reduction
Recovery in 2010 is possible, but downside risks of a prolonged
global recession are still high
Policy challenges:
Further decisive and cooperative action is needed to restore the
financial health of banks
Fiscal stimulus measures should be better coordinated and aligned
with global sustainable development objectives
Deeper reforms of the international financial architecture should
urgently be set in motion
A new framework for global economic governance
2
May-09
Mar-09
Jan-09
Nov-08
Sep-08
Jul-08
May-08
Mar-08
Jan-08
Nov-07
Sep-07
Jul-07
May-07
Mar-07
Jan-07
Nov-06
Sep-06
Jul-06
May-06
Mar-06
Jan-06
Credit crunch in the US
is easing somewhat…
Spread of interbank lending, %
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
3
… but borrowing costs for
developing countries remain
elevated; private capital flows are
reversing
10
Africa
Asia
8
Latin America
Europe
6
4
2
0
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
4
World trade growth is
collapsing
12
10.9
9.2
7.7
Annual percentage change
8
6.6
4.1
4
2.4
0.5
0
2004
2005
2006
2007
2008
2009
2010
-4
-8
-12
-11.1
5
World economy is in recession,
recovery is uncertain
5
4.0
3.9
4
3.9
3.5
3
Optimistic
2
2.7
2.1
1.6
1
0
Pessimistic
2003
2004
2005
2006
2007
2008
2009
2010
-1
-2
-2.6
-3
6
Severe recession in developed
economies
6
4.0
GDP growth rate, %
4
2
1.1
1.5
1.5
1.0
0.4
0.0
0.7
-0.1
0
-0.4
-0.6
-1.1
-2
-4
-1.7
-3.5
-3.7
-6
-7.1
-8
Japan
USA
2008
2009
2010 Baseline
EU15
2010 Pessimistic scenario
NewEU
7
Sharp contraction of economic
activity in the economies in
transition…
8
6
5.4
GDP growth rate, %
4.2
4
2
1.5
1.0
0
-0.3
-2
-0.6
-1.9
-4
-6
-5.4
South-eastern Europe
2008
2009
2010 Baseline
CIS
2010 Pessimistic scenario
8
Developing countries are being
hit hard through trade and
finance channels
• Spill-over effects through financial markets are hitting
strongest on the middle-income countries
• All developing countries are affected through slowing
trade.
• Primary exporters are also seeing deterioration in
terms of trade
• Low-income, net food and oil-importers are seeing
improving terms of trade, but are suffering mainly
through reduced demand for exports.
• Falling remittances are affecting many small
developing economies
• Balance of payments constraints are emerging in
growing number of countries and vast reserves are
quickly evaporating
9
Leading to strong growth
deceleration in all developing
countries
8
6.8
87
GDP growth rate, %
GDP growth rate, %
76
6
5
4
3
2
1
5
6.1
5.4
4.9
5.4
5.7
5.4
3.9
4.3
4.0
2.9
3
1
6.8
4.9
4
2
6.1
4.1
4.1
4.5
4.0
4.5
4.0
3.1
2.9
2.0
2.9
1.7
1.4
1.7
0.9
1.4
0.9
0
0
-1
-1
-2
-2
-3
-3
-0.7
-0.7
-1.9
Developing
Developing
countries
countries
-0.7
-1.1
-1.9
Latin
Asia
Western Latin
South Asia
Africa East East
Africa
Asia Asia
South Asia
Western
Asia
America America
Pessimistic scenario
2010
2009 2010
2008 2009
2008
Baseline
10
60 developing countries will
see declining incomes in 2009
(number of countries with declining per capita incomes)
70
60
60
Developed countries
Economies in transition
Developing countries
50
40
33
30
22
18
20
13
12
14
10
2
1
0
2008
2009
2010
11
Setbacks in poverty reduction
Total
Slowdown poverty
reduction compared
with pre-crisis growth
73 – 103 million
Africa
12 – 16 million
East and South Asia
56 – 80 million
Latin America and
Caribbean
~ 4 million
12
3. Recovery possible in 2010, but
downside risks are high
• Quick recovery only if
– financial sector problems bottom out soon
– fiscal stimulus gains traction soon
– …but even then, recovery maybe feeble without
enhanced, concerted countercyclical responses
• Deeper and prolonged crisis
(a) Prolonged credit crunch in major economies and deeper
recession
(b) Global imbalances and risk of exchange instability
(c) Continued steep capital reversals in emerging markets
(d) Less ODA for low-income countries
(e) Protectionist tendencies
13
The dollar volatility continues
115
0.85
105
0.80
95
0.75
85
0.70
Yen/$ (LHS)
75
Euro/$ (RHS)
0.65
65
May-09
Apr-09
Mar-09
Feb-09
Jan-09
Dec-08
Nov-08
Oct-08
Sep-08
Aug-08
Jul-08
Jun-08
0.60
14
…and global imbalances persist,
though narrowing in deflationary
spiral
600
United States
400
Japan
Billion US$
200
0
European Union
-200
-400
-600
Developing
countries (excl
China) and EiT
-800
China
2004
2005
2006
2007
2008
2009
15
4. Policy challenges (1)
• We have seen extraordinary responses
to deal with the crisis
– $18 trillion of public funding (30% of WGP)
allocated to financial sector
– $2.7 trillion of fiscal stimulus (4% of WGP
spent over 2009-2011) planned, less than
the desired level of 2-3% of WGP annually
– Financial landscape has changed
– Coordinated monetary responses
16
4. Policy challenges (2)
•
More and even bolder action is needed:
–
Decisive and cooperative action is needed to restore the health
of financial sector.
–
Stronger, better coordinated fiscal stimulus, greater policy
coherence:
•
More balanced stimulus (stronger in surplus, weaker in
deficit countries; facilitate countercyclical responses
developing countries)
•
Coherence with development financing policies
•
Coherence with trade policies (no protectionism; enhanced
access to markets for developing-country exports and Aid
for Trade)
•
Coherence with climate change and food security, and
more broadly with global sustainable development
objectives
•
Coordination medium-term financing of stimulus and
safeguards against major exchange rate misalignments
17
Global gains from improved
policy coordination
18
19
4. Policy challenges (3)
• More and even bolder action is needed:
– Outcomes remain uncertain, policies will
need to be closely monitored and consulted
with business community and society
• Fundamental reforms of the international
financial system are needed to overcome
the systemic flaws
• A new framework for global economic
governance
20