what is the global economic outlook? paris, 6 may 2014 angel gurría, secretary-general and rintaro...
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WHAT IS THE GLOBAL ECONOMIC OUTLOOK?Paris, 6 May 2014
Angel Gurría, Secretary-General and Rintaro Tamaki, Deputy Secretary-General and Acting Chief Economist
2
Growth in advanced economies is rebounding…
Real GDP growthPer cent
2010 2011 2012 2013 2014 20150
2
4
6
8
10
0
2
4
6
8
10
OECD
BRIICS
Source: OECD May 2014 Economic Outlook database.
3
… driving a strengthening of global growth
Real GDP growthPer cent
Source: OECD May 2014 Economic Outlook database.
2011 2012 2013 2014 2015
World1 3.7 3.0 2.8 3.4 3.9
OECD1 2.0 1.5 1.3 2.2 2.8
BRIICS1,2 7.3 5.7 5.4 5.3 5.7
United States 1.8 2.8 1.9 2.6 3.5
Euro area 1.6 -0.6 -0.4 1.2 1.7
Japan -0.5 1.4 1.5 1.2 1.2
China 9.3 7.7 7.7 7.4 7.3
2. Brazil, Russia, India, Indonesia, China and South Africa.
1. Moving nominal GDP weights, using purchasing power parities.
4
Some of the stalled cylinders of growth are starting to fire again
Fixed investmentVolume index, 2007 = 100
Trade in goods and servicesVolume, year-on-year percentage change
4096941122412754142641579417304188342036421864233970
80
90
100
110
120
70
80
90
100
110
120United States Japan
Euro area
Pre-crisis level
-2
0
2
4
6
8
10
-2
0
2
4
6
8
10
World
Average growth of world trade (1990-2007)
Source: OECD May 2014 Economic Outlook database.
5
Financial conditions are facilitating faster growth
OECD Financial Conditions Index (FCI)1
1. The FCI takes into account interest and exchange rates, credit condition surveys and household wealth. A unit increase raises GDP by ½ to 1% after 4-6 quarters.
Bank lending rates for European companies1 3-month moving average, per cent
1. Rate on new loans to non-financial corporations (all maturities), except for Greece (up to one year).
-1
0
1
2
3
4
5
6
-1
0
1
2
3
4
5
6United States
Japan
Euro areaEasier conditions
Source: OECD May 2014 Economic Outlook database; OECD calculations
Source: ECB MFI interest rates.
2011
2011
2011
2011
2012
2012
2012
2012
2013
2013
2013
2013
2014
0
1
2
3
4
5
6
7
0
1
2
3
4
5
6
7
Germany Spain France
Greece Italy Portugal
6
Drag from fiscal consolidation in the United States and the euro area is diminishing
Consolidation effortChange in underlying primary balance1 as per cent of potential GDP
1. Budget balance excluding interest payments and adjusted for the economic cycle.
2011 2012 2013 2014-1
0
1
2
-1
0
1
2
United States Euro area
Japan
Source: OECD May 2014 Economic Outlook database.
7
Unemployment is falling, but from high levels, and the euro area is lagging
Unemployment ratePer cent
Number of unemployed personsMillions
2006
2006
2007
2008
2009
2009
2010
2011
2012
2012
2013
2014
2015
2015
0
2
4
6
8
10
12
14
0
2
4
6
8
10
12
14
United States Euro area
Japan
2007 2008 2009 2010 2011 2012 2013 2014 20150
10
20
30
40
50
60
0
10
20
30
40
50
60
Other OECD USA Euro area
11 million
17 million
15 million
7 million
12 million19 million
Source: OECD May 2014 Economic Outlook database.
8
RISKS
9
Falling inflation in the euro area points to increased deflation risks
Euro area headline inflation1
Per cent
1. Year-on-year change of harmonised index of consumer prices.
Inflation expectations in the euro areaFrom inflation swaps; 10-day moving average, in per cent
2011 2012 2013 2014 20150
1
2
3
0
1
2
3
0
1
2
3
0
1
2
3
Between 1 and 2 years
Between 5 and 10 years
Source: OECD May 2014 Economic Outlook database. Source: Datastream; OECD calculations.
10
Credit has grown quickly in some EMEs, increasing financial vulnerabilities
Credit growth to the private sector1
Per cent
1. Average annual growth between end-December 2006 and end-September 2013.
Selected shadow banking products in ChinaPer cent of GDP
0
5
10
15
20
25
0
5
10
15
20
25
Average credit growth for US, euro area, Ja-pan
Source: BIS; OECD calculations.
Source: CBRC; Kwan (2014); National Bureau of Statistics of China; and China Trustee Association.
2008 2009 2010 2011 2012 20130
10
20
30
40
0
10
20
30
40
Wealth management products Trust assets
11
POLICY REQUIREMENTS
12
United States: gradually reduce monetary stimulus, strengthen active labour market policies
Household consumptionVolume index, 2007=100
Employment and labour force participationPer cent of working age population
2007 2008 2009 2010 2011 2012 2013 201450
55
60
65
70
50
55
60
65
70
Unemployed
Employed
95
100
105
110
115
95
100
105
110
115
Source: OECD May 2014 Economic Outlook database.
13
Euro area: monetary stimulus needed alongside banking system repair
Bank credit to non-financial private corporationsPercentage change1
Unemployment ratePer cent
2006
2006
2007
2008
2009
2009
2010
2011
2012
2012
2013
2014
2015
2015
0
5
10
15
20
25
30
0
5
10
15
20
25
30GermanyFranceItalySpainPor-tugal
-12
-6
0
6
-12
-6
0
6
March 2012 - March 2013
March 2013 - March 2014
Source: OECD May 2014 Economic Outlook database.
Note: February to February for Italy.1. Adjusted for loan sales and securitisation.Source: OECD May 2014 Economic Outlook database.
14
Japan: continue with monetary easing and fiscal consolidation, launch 3rd arrow (structural reform)
Core inflation1
Per centGross government debt
Per cent of GDP
2012 2012 2012 2012 2013 2013 2013 2013 2014-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
Initiation of “Q-squared” easing by BoJ
2011 2012 2013 2014 2015190
200
210
220
230
240
190
200
210
220
230
240
Source: OECD May 2014 Economic Outlook database.
1. Excluding food and energy.
15
Reforms are needed to address the scars from the crisis and boost growth
Estimated effects of the crisis on potential per capita output of OECD countries
Percentage deviation from pre-crisis scenario1
OECD structural unemploymentPer cent of labour force
2007
2010
2013
6.0
6.5
7.0
7.5
6.0
6.5
7.0
7.5
200720082009201020112012201320142015201620172018-12
-10
-8
-6
-4
-2
0
2
-12
-10
-8
-6
-4
-2
0
2
Upper/lower quar-tile
OECD aggregate
1. In the counter-factual baseline, productivity growth continues at its 2000-07 rate and structural unemployment and participation rates remain at their 2007 levels.
Source: OECD May 2014 Economic Outlook database; OECD calculations.
16
A faster pace of structural reform is needed in the BRIICS also, given the slowdown in potential growth
.
Potential output growthPer cent
China India Russia Indonesia South Africa
Brazil0
2
4
6
8
10
12
0
2
4
6
8
10
12
2007 2014
Source: OECD May 2014 Economic Outlook database.
17
Key messages
.
Major advanced economies are building momentum, driving the pick-up in global growth.
Nevertheless, risks remain that could blow the recovery off course.
More ambitious structural reforms are needed to create jobs and sustain stronger growth.