global/regional economic and financial...
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2015/FDM1/003 Session: 1
Global/Regional Economic and Financial Outlook
Purpose: Information Submitted by: International Monetary Fund
Finance and Central Bank Deputies’ MeetingTagaytay, Philippines
5-6 March 2015
Global/Regional Economic and Financial Outlook
Odd Per Brekk Director
IMF Regional Office for Asia and the Pacific
APEC Finance Deputies Meeting March 5, 2015
¡ The good, but complex, news: § The decline in the price of oil § Exchange rate adjustments
¡ The less good news: § Hard numbers for 2014:
slightly worse than expected (except for the U.S.)
§ Weak investment and further downward revisions to potential growth
¡ On net: Global growth revised down,
with heterogeneity § Oil importers vs. exporters § Commodity importers vs. exporters § Legacies vs. no legacies § Dollar linked vs. euro-yen linked § Potential growth decline vs.
no potential growth decline
2 Source: International Monetary Fund, World Economic Outlook, January 2015.
0
1
2
3
4
5
6
7
8
2010 2011 2012 2013 2014 2015 2016
(Percent) Real GDP Growth
Emerging Market and Developing Economies World Advanced Economies
3
-4
-2
0
2
4
6
8 (Percent YoY)
Real GDP Projections (Descending order by 2015 growth rate projections)
2013 2014 2015 2016
Source: International Monetary Fund, World Economic Outlook, January 2015.
4
40
50
60
70
80
90
100
110
120
Oil Spot and Future Prices (USD per barrel)
5
Sources: Haver Analytics, and IMF staff projections and calculations.
2/20/2015
Note: § Scenario 1: persistent supply shift, accounting for 60% of the
observed decline in futures prices. § Scenario 2: supply shift, accounting for 60% of the decline in
prices initially, but gradually unwound over time.
(Percent point difference)
Financial Conditions Have Eased Overall In Advanced Economies …
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5 United States Germany United Kingdom Japan
10 year Government Bond Yields (Percent)
60
80
100
120
140
160
180
200
S&P 500
Eurofirst 300
Nikkei 225
Equity Indices (Index, Jan 4 2010 =100)
6
7
EM Corporates: Bond Spreads (Basis points)
Oil Exporting Sovereigns: CDS (Basis points)
Source: Bloomberg L.P.
8
Policy Interest Rate Expectations (Percent; dashed lines are from the October 2014 WEO)
U.S. 5-year Rates (Percent)
Sources: International Monetary Fund, World Economic Outlook, January 2015 and Bloomberg.
1.0
1.5
2.0
2.5
3.0
3.5
Jan-14 Apr-14 Jul-14 Oct-14 Jan-15
5-year 5-year forward inflation swap
5-year government bond yield
2.285
1.594
2/20/2015
ADVANCED ECONOMIES REER EMERGING ECONOMIES REER
9 Source: Bank for International Settlements and IMF staff calculations.
90
95
100
105
110
United States
Euro area
Japan
United Kingdom
65
70
75
80
85
90
95
100
105
110
115
Indonesia
China
Mexico
Russia
(Index, 2014=100) (Index, 2014=100)
10
Oil importers§ Given output gaps, let demand and output increase§ Limit passthrough of low headline inflation into core inflation
Oil exporters§ Adjust government spending (choose the speed)§ Allow depreciation (choose the speed)§ Limit passthrough of currency depreciation into core inflationGeneral § Implement gradual fiscal adjustment to rebuild “fiscal space”
Ø Emerging Markets: decrease energy subsidies and increase targeted transfersØ Advanced Economies: consider increasing energy taxes, decreasing other taxes
§ Advanced Economies: continue monetary policy accommodation to support the recovery, although developments are diverging§ Longer-term and sustainable growth:
Ø Reinvigorate structural reforms to raise productivity and potential outputØ Boost infrastructure investment
Thank you !
APEC Finance Deputies Meeting March 5, 2015