Global Outlook - Parliamentary Days 2014

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Information about Global Outlook - Parliamentary Days 2014
News & Politics

Published on February 14, 2014

Author: OECD

Source: slideshare.net

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OECD’s recent analysis of the economic outlook in OECD and key emerging economies, as well as policy recommendations to spur growth, boost confidence and soften the impact of the jobs crisis. By Pier Carlo Padoan, Deputy Secretary-General and Chief Economist.

International parliamentary seminar. The global outlook 5 February, 2014 Pier Carlo Padoan Deputy Secretary-General and Chief Economist, OECD

Growth prospects strongest in emerging economies, weakest in euro area. Projected change in real GDP in 2014-15 Annual average, per cent 8 8 7 BRIICS 7 6 Euro area countries 6 5 Other OECD member countries 5 1 4 4 3 3 2 2 1 1 0 0 -1 CHN IND MEX KOR ZAF USA POL AUS SWE CAN SVK BRA IRL HUN DNK FIN FRA ITA ESP NLD IDN CHL TUR ISR EST NZL NOR ISL RUS CHE GBR LUX AUT DEU CZE BEL JPN PRT GRC SVN -1 1. BRIICS countries comprise Brazil, China, India, Indonesia, Russia and South Africa. Source: OECD Economic Outlook database 94. 2

The current recovery is still weak by past standards… OECD-wide real GDP, relative to pre-recession peak Per cent 20 15 1970s; Peak at 1974Q3 1990s; Peak at 1990Q4 1980s; Peak at 1981Q3 2000s; Peak at 2008Q1 20 15 10 10 5 5 0 0 -5 -5 Note: The point labelled “t” on the horizontal axis corresponds to the pre-recession peak quarter for each cycle. Source: OECD National Accounts database. 3

Drivers of growth?  Trade slower than in the past  Will investment pick up?  Credit still lagging in EA  Unemployment remains elevated  EME slower, more vulnerable 4

A striking slowdown in world trade growth… World trade/GDP1 World trade volumes Per cent 2007 = 100 30 30 25 25 20 20 15 15 10 120 120 100 100 10 80 80 1. Trade and GDP both in volume terms, in 2005 prices. Source: OECD National Accounts database, CPB World Trade Monitor. 5

Weakness in investment… OECD-wide fixed investment World FDI flows Volume, 2007 = 100 Index of USD values, 2007 = 100 105 105 120 120 100 100 100 100 95 95 80 80 90 90 60 60 85 85 40 40 80 80 20 20 75 75 0 0 Note: Fixed investment values are the weighted average of OECD member countries, where the weights are GDP measured at 2005 PPP USD. Source: OECD Economic Outlook 94 database, OECD Foreign Direct Investment (FDI) Statistics. 6

Credit lagging in the major economies… Bank loans to non-financial private sector 2007 = 100 110 110 105 105 100 100 95 95 90 90 85 Major OECD economies 80 85 Euro area United States Japan 80 Note: Major OECD economies is calculated as the weighted average of the indices (2007 = 100) of nominal bank credit to the non-financial private sector for the United States, the euro area and Japan, where the weights are GDP in 2007 measured at USD PPP. Source: Datastream and European Central Bank. 7

… stubbornly high unemployment, especially in Europe OECD-wide unemployment Unemployment rate Per cent Millions of persons 14 55 12 12 50 50 10 10 45 45 8 8 40 40 6 6 35 35 4 4 30 30 25 25 20 20 14 2 0 United States Euro area Japan 2 0 55 Source: OECD national accounts database, OECD Economic Outlook 94 database, and Eurostat. 8

Will EMEs return to strong growth? Most EMEs are now expected to see cyclical upturns… …but rapid credit growth is a source of vulnerability in some 9

Will EMEs return to strong growth? China is still growing strongly… …but high public debt in some regions is a concern 10

Negative spillovers from emerging economies could be stronger than before A deeper slowdown in EMEs would have negative feedback effects on advanced economies. Some advanced economies have tight trade and financial links with EMEs, and would be significantly affected. First-year impact on growth of a 2% decline in domestic demand in non-OECD countries excluding China 0.0 0.0 -0.5 -0.5 -1.0 -1.0 Source: OECD Economic Outlook 94 database; and OECD calculations. 11

Exposure to EME could hit banks Banks' foreign claims on emerging market economies¹ Consolidated claims on an ultimate risk basis² 40 35 30 40 Banks' foreign claims in % of GDP Banks' foreign claims in % of financial assets 35 30 25 25 20 20 15 15 10 10 5 5 0 0 Source: OECD Economic Outlook 94 database; BIS; National sources; and OECD calculations.. 12

Has the euro area crisis ended? Bond yields have recently converged somewhat… …and bank lending rates are edging down in most countries 13

Has the euro area crisis ended? Most deficit countries have reduced their relative unit labour costs since 2008 … but some of the periphery countries are in deflation or very close to it 14

EA countries have made progress on structural reform… Responsiveness to Going for Growth recommendations, 2011-12 Adjusted for the difficulty of undertaking reform¹ 1.0 1.0 0.5 0.5 0.0 0.0 GRC IRL PRT ESP ITA Euro area OECD 1. The adjusted responsiveness rate is calculated as the share of recommendations in Going for Growth 2011 for which 'significant' action has been taken, where each recommendation is weighted by the inverse of average responsiveness to priorities in this area in non-crisis circumstances, in order to reflect the fact that some areas of reform are more difficult than others. The euro area and OECD rates are calculated as an unweighted average; the OECD rate is not adjusted. Source: OECD Going for Growth 2013. 15

Although adjustment must be more symmetric Current account balance/GDP Per cent, 4-quarter moving average 10 10 5 5 0 0 -5 -5 -10 -10 -15 -15 -20 DEU GRC ITA PRT ESP -20 Source: OECD National Accounts database. 16

Will growth in the euro area be sustained? Investment is weak by past standards in most countries Export performance in the periphery has improved, but much of the post-crisis adjustment has come through import compression 17

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