high uncertainty - oecd
TRANSCRIPT
20 September 2018
Laurence BooneOECD Chief Economist
OECD INTERIM ECONOMIC OUTLOOK
High uncertainty weighing on global growth
http://www.oecd.org/eco/outlook/economic-outlook/ECOSCOPE blog: oecdecoscope.wordpress.com
Key messages
2
Global growth is peaking and is less synchronised
• Global growth should plateau at 3.7% in 2018 and 2019• The job market has recovered but slack remains and wage growth is disappointing
Risks are intensifying, uncertainty is widespread
• Rising trade restrictions risk hurting jobs and living standards• Tightened financial conditions increase stress on a number of EMEs• Political risks could prevent Europe from thriving• Ten years after the crisis, some financial risks have built up again
Policies should aim to enhance resilience, productivity and inclusiveness
• Reduce policy uncertainty, especially for trade, to support confidence and investment• Review fiscal policy to react in case of a downturn and prioritise investment• Implement reforms to boost long-term productivity and opportunities for all
Global growth may be peaking and is less synchronised
3
GDP growth is dispersed World GDP growth plateaus
Note: Right panel: triangles show annual projections for 2018 and 2019.Source: OECD Economic Outlook database.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2016 2017 Q22018
2018 2019
% y-o-y% y-o-y United States Euro area Japan
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Q22016 2017 2018
% y-o-y% y-o-y
Growth prospects have weakened
4
G-20 emerging economiesG-20 advanced economies
Source: OECD Economic Outlook database.
1.4
1.6
1.8
2.0
2.2
2.4
1.4
1.6
1.8
2.0
2.2
2.4
2014 2015 2016 2017 2018 2019
September projections May projections% y-o-y % y-o-y
4.6
4.8
5.0
5.2
5.4
5.6
4.6
4.8
5.0
5.2
5.4
5.6
2014 2015 2016 2017 2018 2019
September projections May projections% y-o-y % y-o-y
2017 2018 2019 2017 2018 2019
World 3.6 3.7 3.7 G-20 3.8 3.9 3.8
Australia 2.2 2.9 3.0 Argentina 2.9 -1.9 0.1Canada 3.0 2.1 2.0 Brazil 1.0 1.2 2.5Euro area 2.5 2.0 1.9 China 6.9 6.7 6.4 Germany 2.5 1.9 1.8 India1 6.7 7.6 7.4 France 2.3 1.6 1.8 Indonesia 5.1 5.2 5.3 Italy 1.6 1.2 1.1 Mexico 2.3 2.2 2.5Japan 1.7 1.2 1.2 Russia 1.5 1.8 1.5Korea 3.1 2.7 2.8 Saudi Arabia -0.7 1.7 2.6United Kingdom 1.7 1.3 1.2 South Africa 1.2 0.9 1.8United States 2.2 2.9 2.7 Turkey 7.4 3.2 0.5
OECD Interim Economic Outlook projections
5
Real GDP growth revised slightly downYear-on-year, %. Arrows indicate the direction of revisions since May 2018.
Note: Difference in percentage points based on rounded figures. Dark green and dark orange for, respectively, upward and downward revisions of 0.3 percentage points and more. Light green and light orange for, respectively, upward and downward revisions of less than 0.3 percentage points. The European Union is a full member of the G-20, but the G-20 aggregate only includes countries that are also members in their own right. 1. Fiscal years starting in April.
Trade tensions are beginning to bite
6
Trade growth has slowedWorld merchandise exports, volume
Export orders have worsenedGlobal
Note: Left panel: Seasonally-adjusted, in USD at constant prices. Right panel: Data normalised over the 2004-2018 period. All orders refer to the composite PMI (manufacturing and services). Source: CPB; Markit; and OECD calculations.
0.0
0.5
1.0
1.5
2.0
0.0
0.5
1.0
1.5
2.0
2016 2017 2018
% q-o-q % q-o-q
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18
All orders Manufacturing export ordersNormalised 3-month moving average
-60
-50
-40
-30
-20
-10
0
10
20
-60
-50
-40
-30
-20
-10
0
10
20
Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18
Total To China% y-o-y % y-o-y
New trade restrictions:Targeted sectors take a hit
US exports of vehiclesUS imports of steel articles
7Note: Percentage changes in USD value.Source: United States International Trade Commission; and OECD calculations.
-40
-30
-20
-10
0
10
20
30
-40
-30
-20
-10
0
10
20
30
Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18
Total From China% y-o-y % y-o-y
Investment growth is too weak to support productivity gains
8Note: Right panel: Labour productivity growth rates, annual averages.Source: OECD Economic Outlook database; and OECD calculations.
Productive capital stock growth Productivity growth
-0.5
0.0
0.5
1.0
1.5
2.0
-0.5
0.0
0.5
1.0
1.5
2.0
United States Euro area Japan
% y-o-y% y-o-y2000-2007 2015-2017 2017Q2-2018Q2
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2002 2004 2006 2008 2010 2012 2014 2016
United States Euro area Japan% y-o-y % y-o-y
2017
0
5
10
15
20
25
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Q2
%
Unemployment
Wider unemployment
+6pp +8pp
72
73
74
75
76
0
1
2
3
4
5
6
7
8
9
10
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Q2
%%
Unemployment (lhs)
Labour force participation (rhs)
2008-2018: -2pp
Note: Unemployment and wider unemployment rates among active labour force aged 15-64 years. Labour force participation rate among population aged 15-64 years. Wider unemployment rate refers to U6 unemployment and includes unemployed, involuntary part-time workers and marginally attached workers. Source: OECD Short-Term Labour Market statistics; National Labour Force Surveys; and OECD calculations.
Unemployment is falling but too many people remain out of employment
9
Euro areaUnemployment, involuntary part-time work and
marginally attached workers
United StatesUnemployment and labour force participation rates
Wage growth lags behind pre-crisis levelsin some countries
10
Wage growthAverage annual change in real wages
Note: 2018H1 for year-on-year growth in % over 2017H1. Growth rates are annualised.Source: OECD Economic Outlook database; and OECD calculations.
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
United States Japan Germany France United Kingdom
% y-o-y% y-o-y2000-2007 2015-2017 2018H1
RISKS ARE INTENSIFYING, UNCERTAINTY IS WIDESPREAD
11
An escalation in trade restrictions would harm investment, growth and jobs
Note: The business sector corresponds to ISIC Rev.3 Divisions 10 to 74.Source: Preliminary estimates based on OECD Inter-Country Input-Output Database; OECD Annual National Accounts Database; OECD Structural Analysis (STAN) Database; OECD Trade in Employment Database; World Input-Output Database (WIOD); and OECD calculations.
12
0
3
6
9
12
15
0
10
20
30
40
50
DEU KOR ESP ITA FRA GBR RUS ZAF CAN TUR IDN MEX IND AUS CHN JPN USA BRA
million% Share of business sector jobs (lhs) Number of jobs (rhs)
Jobs dependent on foreign final demand2015 or latest available
Rising US rates and home-grown imbalances create turbulence in some EMEs
13
Exchange ratesvis-à-vis USD
Note: Data are indexed to 01-Jan-2018. Data as of 18 September 2018.Source: Thomson Reuters; and OECD calculations.
TUR: -41%
ARG: -53%
40
50
60
70
80
90
100
110
Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18
Argentina Brazil South Africa Turkey India ChinaJan 18 = 100
Depreciation against USD
Emerging markets with external imbalancesare more vulnerable
External debt
14
Current account balance
0
10
20
30
40
50
60
70
80
90
0
10
20
30
40
50
60
70
80
90
CHN
IND
PHL
THA
BRA
IDN
RUS
ARG
MEX
COL
ZAF
TUR
CHL
MYS
POL
HUN
2017 1995% of GDP % of GDP
Note: Gross external debt is the outstanding amount of those actual current, and not contingent, liabilities that require payment of principal and/or interest by the debtor at some point(s) in the future and that are owed to nonresidents by residents of an economy. Source: IMF Balance of Payments and International Investment statistics; and OECD calculations.
-10
-5
0
5
10
15
-10
-5
0
5
10
15
THA
HUN
MYS
RUS
CHN
POL
PHL
BRA
CHL
MEX
IDN
IND
ZAF
COL
ARG
TUR
2017 1995% of GDP % of GDP
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2014 2015 2016 2017 2018
Italy Spain Portugal% %
15
UK-EU trade relationshipExports
Note: Left panel: Data as of 2016 for services and 2017 for goods. Exports and GDP of the European Union excludes those of the UK.Source: OECD International Trade in services statistics; UN Comtrade database; OECD Economic Outlook database; Thomson Reuters; and OECD calculations.
Political risks could hamper Europe’s growth and social cohesion
Government bond yields2-year yields
0
2
4
6
8
10
12
14
16
Goods ServicesUnited Kingdom
World excl. EUEU% of GDP
0
5
10
15
20
25
30
35
Goods ServicesEuropean Union (rhs)
World excl. UKUK % of GDP
16
Change in total debt 2005-2017
Note: Left panel: *Total debt levels, 2017 or latest available. **EMEs excluding China. Private debt ratios shown are computed on aconsolidated basis except for Canada, Japan and the United States for which consolidated data are not available. Public debt ratios are based on the national accounts definitions except for EU countries where debt ratios based on Maastricht criteria are shown. Data for China and EMEs are credit. Source: OECD National Accounts database; Bank for International Settlements; OECD Economic Outlook database; Thomson Reuters; and OECD calculations.
Ten years after the crisis,financial risks have built up again
Equity prices
0
50
100
150
200
250
300
350
0
50
100
150
200
250
300
350
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
S&P 500 NASDAQ EuroStoxx Nikkei 225Jan-2007 = 100 Jan-2007 = 100
-200
-100
0
100
200
300
400
500
600
-40
-20
0
20
40
60
80
100
120
Households Non-financial corporatesPrivate sector (EMEs) Government2017* total debt (rhs)
% pts of GDP % of GDP
POLICIES SHOULD AIM TO ENHANCE RESILIENCE, PRODUCTIVITY AND
INCLUSIVENESS
17
The monetary policy stance in major economies is appropriate
Inflation in major advanced economiesConsumer price inflation, excluding food and energy
Note: Core inflation excludes energy and food products and refers to harmonised data for the euro area. Inflation numbers affected by the effects of the 2014 tax hike in Japan are not shown.Source: OECD Main Economic Indicators Database.
18
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
2015 2016 2017 2018
United States Japan Euro area% %
-5
-4
-3
-2
-1
0
1
2
3
4
5
-5
-4
-3
-2
-1
0
1
2
3
4
5
United States Euro area Japan
% pts of GDP % pts of GDP
19
Note: Left panel: The fiscal stance is measured as the underlying primary balance, in % of potential GDP. Right panel: Public debt based on the national accounts definition except for EA countries where public debt based on Maastricht criteria is shown. Therefore, debt numbers are not fully comparable between EA and non-EA countries.Source: OECD Economic Outlook database; and OECD calculations.
Change in the fiscal stance2017-2019, projected
Fiscal policies should avoid being procyclicaland should focus on the long term
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
United States Euro area Japan
% pts of potential GDP % pts of potential GDP
Easing
Tightening
Change in public debt2017-2019, projected
Fiscal space is uneven: Investment should be prioritised
20
Note: Public debt based on the national accounts definition except for EA countries where public debt based on Maastricht criteria is shown. Therefore, debt numbers are not fully comparable between EA and non-EA countries.Source: OECD Economic Outlook database; and OECD calculations.
Strong case for more public investment in some countries
Other countries could benefit but lack fiscal space
Priorities: rebuild buffers and invest in future growth
Coordinated fiscal action yields larger gains50
75
100
125
150
-1.0 -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0
Canada GermanyFranceUnited Kingdom
United States
Italy
Nominal GDP growth rate minus 10-year yield on government bonds, % pts
More fiscal space
Higher returns to public investment
150
200
250
Japan
Public debt, % of GDP
2007
2018
2007
2018
2018
20182018
2018
2018
2007
Note: Data for 2018 are projections. Public debt based on the national accounts definition except for EU countries where public debt based on Maastricht criteria is shown. Therefore, debt numbers are not fully comparable between EU and non-EU countries.Source: OECD Economic Outlook database; and OECD calculations.
21
Banks are better capitalisedRegulatory Tier 1 capital to risk-weighted assets
Source: IMF Soundness Indicators database; ECB Statistical Data Warehouse, European Central Bank; and OECD calculations.
5
10
15
20
25
5
10
15
20
25
AUS CAN ESP USA ITA PRT FRA BEL DEU GBR IRL
%% 2017 2008
Ten years later: Banks are stronger but much remains to be done
Financial fragilities remain in the euro area Share of own-government securities
in bank holdings of euro area sovereign debt
0
10
20
30
40
50
60
70
80
90
100
0
20
40
60
80
100
ITA FRA GRC ESP PRT DEU AUT BEL NLD FIN IRL
% 2018 2008 %
22Note: The dotted line shows a linear projection based on the average annual growth rate of OECD potential GDP per capita in the 2000-2007 period.Sources: OECD Economic Outlook database; and OECD calculations.
Real GDP per capita, OECD
The real economy has not regained the ground lost during the crisis
100
105
110
115
120
125
130
135
140
100
105
110
115
120
125
130
135
140
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Actual GDP per capita Pre-crisis trend potential GDP per capita, 2000-2007Index 2000 = 100 Index 2000 = 100
23
Education, skills and labour policies are keyShare of priority recommendations followed by action
Note: Refers to reform priorities identified in Going for Growth in 2017 for the 35 OECD economies, Argentina, Brazil, China, Colombia, Costa Rica, India, Indonesia, Russia and South Africa. Sources: OECD Going for Growth 2018; and OECD calculations.
Focus on people to raise well-being, improve opportunities and address political tensions
0 10 20 30 40 50 60 70 80 90 100
0 10 20 30 40 50 60 70 80 90 100
Alignment of higher education to labour market needs
Support for disadvantaged schools and students
Reduction in the tax wedge on low-skilled workers
Vocational education, training and apprenticeships
Improved active labour market policies
Access to quality childcare and early education
%
%
Fully implemented or in process of implementation No action taken in 2017
Higher reform effort
Lower reform effort
Key messages
24
Global growth is peaking and is less synchronised
• Global growth should plateau at 3.7% in 2018 and 2019• The job market has recovered but slack remains and wage growth is disappointing
Risks are intensifying, uncertainty is widespread
• Rising trade restrictions risk hurting jobs and living standards• Tightened financial conditions increase stress on a number of EMEs• Political risks could prevent Europe from thriving• Ten years after the crisis, some financial risks have built up again
Policies should aim to enhance resilience, productivity and inclusiveness
• Reduce policy uncertainty, especially for trade, to support confidence and investment• Review fiscal policy to react in case of a downturn and prioritise investment• Implement reforms to boost long-term productivity and opportunities for all