Faltering global Faltering global economic economic

growthgrowth

Rob VosRob VosUnited NationsUnited Nations

Mexico CityMexico City18 January, 201218 January, 2012

www.un.org/esa/policy

2

Main messages1. The world economy is at a critical juncture

– Risk of double-dip in major developed economies – Growth in emerging economies is moderating

2. Downside risks and uncertainties– Contagion of sovereign debt crisis, combined with f ragility in

banking sector– Persistent high unemployment– Political tensions leading to policy paralysis

3. Policy challenges– No premature fiscal austerity, rather more short-te rm stimulus

is needed– … that is internationally coordinated – … and focused on job creation and investments toward s

medium term reforms– Bolder actions to deal with financial fragilities– More stable development financing aligned with refo rms of

financial system

3

Global recovery is slowing

4.1 4.0

1.4

-2.3

4.0

2.82.6

3.2

-3

-2

-1

0

1

2

3

4

5

2006 2007 2008 2009 2010 2011 2012 2013

UN Baseline

44

Protracted slow growth in major developed economies

-3.5

-4.3-3.6

3.0

4.0

1.92.2

1.7

-0.5

1.51.52.0

0.5

2.0 2.01.6

3.1

-6.3

2.92.6

-7

-5

-3

-1

2

4

6

USA Japan EU15 New EU

2009 2010 2011 2012 2013

55

Growth is also moderating in developing countries

2.52.2

5.1

5.7

-1.0

-2.1

7.5

4.5

9.2

7.16.6

6.06.0

2.7

7.2

6.5 6.6

4.3

5.65.0

6.9 6.7

3.73.3

5.1

6.9 6.9

4.3 4.2

5.9

-3

-1

1

3

5

7

9

Developingcountries

Africa East Asia South Asia Western Asia Latin America

2009 2010 2011 2012 2013

66

Despite a rebound, the recovery in transition economies remains fragile

0.5

4.5

1.7

4.3

-3.7

-6.9

2.3

4.03.2

4.2

-8

-6

-4

-2

0

2

4

6

South-eastern Europe CIS (and Georgia)

2009 2010 2011 2012 2013

77

Growth is also moderating in developing countries

2.52.2

5.1

5.7

-1.0

-2.1

7.5

4.5

9.2

7.16.6

6.06.0

2.7

7.2

6.5 6.6

4.3

5.65.0

6.9 6.7

3.73.3

5.1

6.9 6.9

4.3 4.2

5.9

-3

-1

1

3

5

7

9

Developingcountries

Africa East Asia South Asia Western Asia Latin America

2009 2010 2011 2012 2013

Recovery in Latin Americafollows a decelerating trend

-4

-2

0

2

4

6

8

10

LatinAmericaand C.

Argentina Brazil Mexico Venezuela

2012 b/

WESP Projection – solid colorsCEPAL Projection - shaded

2010 2011 a/

Growth pattern acrosscountries in the region is uneven

10

Less favourable external environment…

• World trade moderating notably • A dip in the rising trend of

commodity prices, and highly volatile

• Some capital inflows to emerging markets reversing and contagious rise in borrowing costs

11

• Persistent high unemployment compounded by early withdrawal fiscal stimulus has increased risk of double-dip recession in developed economies

• Sovereign debt distress spreading to more countries, combined with fragile banks, turbulence in financial markets

• Global imbalances lingering but not urgent problem in itself for short run, but exchange rate volatility is!!

… and major downside risks and uncertainties

12

4.1 4.0

1.4

0.5

2.2

-2.3

4.0

2.82.6

3.2

-3

-2

-1

0

1

2

3

4

5

2006 2007 2008 2009 2010 2011 2012 2013

Downside scenario

Risks for (near) double-dip global recession

13

The downside scenario

GDP growth (%) Downside scenarioDeviation

from baseline scenario

2011 2012 2013 2012 2013World 2.8 0.5 2.2 -2.1 -1.0Developed economies 1.3 -0.9 1.1 -2.1 -1.0United States 1.7 -0.8 1.1 -2.3 -0.9Japan -0.5 0.5 1.2 -1.5 -0.8European Union 1.6 -1.6 1.0 -2.3 -0.6Economies in transition 4.1 -2.0 3.3 -5.9 -0.9Developing economies 6.0 3.8 4.5 -1.7 -1.4Africa 2.7 3.3 3.7 -1.7 -1.5East and South Asia 7.1 5.6 5.7 -1.2 -1.2Western Asia 6.6 1.1 2.5 -2.7 -1.8Latin Am. and Carribean 4.3 0.8 2.4 -2.5 -1.8LDCs 4.9 5.4 4.0 -0.6 -1.8

Uncertainties and risks in Latin America1. Greatest risk: possible recession in Europe

and the United States with strong spillover to China

2. Continuing volatility with sharper falls of commodity prices

3. Volatility of capital flows and exchange rates4. High exposure of commercial banks in the

region (especially Spanish-owned) to sovereign debt problems in Europe

5. Reduced fiscal space limiting responsiveness to renewed global downturn

15

1. No premature fiscal austerity, rather more short-term stimulus is needed

2. … that is internationally coordinated3. … and focused on job creation and

investments towards medium term reforms for sustainable development

4. Bolder actions to deal with financial fragilities

5. More stable development financingaligned with reforms of financial system

Policy challenges

16

4.1 4.0

1.4

0.5

2.2

3.9 4.0

-2.3

4.0

2.82.6

3.2

-3

-2

-1

0

1

2

3

4

5

2006 2007 2008 2009 2010 2011 2012 2013

Policy coordination

More coordinated stimulus, not less, is needed to move out of jobs crisis

Faltering global Faltering global economic economic

growthgrowth

United Nations,United Nations,17 January, 201217 January, 2012

www.un.org/esa/policy

18

Hyperlinked slides

19

Moderating growth of world trade

20

Food and oil prices volatile…….but on the rise again

FIGURE I.7 OF WESP

21

Volatile portfolio flows to emerging markets

Equity Funds, net flows to EMEs ( weekly flows in USD billions)

-8

-6

-4

-2

0

2

4

6

8

09/01

/1010

/13/20

1011

/24/20

1001

/05/11

2/16/2

011

3/30/2

011

05/11

/116/2

2/201

108

/03/11

Europe, ME, Africa

Latin America

Asia

Global

22

Rising borrowing costs also for emerging market economies

GRAPH I.6 OF WESP

23

Slow post-recession employment recovery

24

Still spreading sovereign debt distress in Europe

GRAPH I.13B OF WESP

25

Strong volatility among major currencies(NER against dollar)

Figure I.10 of WESP

26

Reversal of strong appreciations in EMEs

Figure I.11 of WESP