The following remarks were made by the Chair at the conclusion of the Executive Board’s discussion of the World Economic Outlook, Global Financial Stability Report, and Fiscal Monitor on September 25, 2014.

Annex: IMF Executive Board Discussion of the Outlook, September 2014

The following remarks were made by the Chair at the conclusion of the Executive Board’s discussion of the World Economic Outlook, Global Financial Stability Report, and Fiscal Monitor on September 25, 2014.

Executive Directors noted that an uneven global recovery continues, notwithstanding setbacks in the first half of the year. However, the pace of recovery remains weak as the legacies of the crisis continue to cast a shadow. Investment has not picked up solidly in many advanced economies, and emerging market economies are adjusting to lower rates of economic growth than those reached during the immediate postcrisis recovery. Moreover, activity in some regions is being negatively affected by ongoing geopolitical tensions. Directors also observed that some problems that predate the global financial crisis—including the effects of an aging population on labor force growth, weak productivity growth, and infrastructure gaps—are coming back to the fore and affecting the pace of recovery through lower potential growth in a number of economies.

Directors noted that global growth should increase as growth in major advanced economies picks up on accommodative monetary policies, supportive financial market conditions, and the more gradual pace of fiscal consolidation (except in a few countries, including Japan). Growth in emerging market and developing economies should also increase with a gradual improvement in structural factors affecting activity in some economies and further strengthening in external demand as advanced economies’ growth recovers.

Notwithstanding this expected pickup in growth, Directors underscored that the recovery remains fragile and subject to significant downside risks. If geopolitical tensions persist it could have negative effects on confidence and contribute to increases in oil prices and declines in asset prices. In some advanced economies, risks also arise from the effects of protracted low inflation or deflation on activity or on public debt dynamics.

Directors underscored concerns about increased financial risk taking arising from the prolonged period of low interest rates, resulting in asset price appreciation, spread compression, and record-low volatility across a broad range of asset classes. They also noted that asset holdings are now concentrated in a small number of large managers. These increased market and liquidity risks could spill over to global markets, potentially triggered by heightened geopolitical risks or volatility associated with monetary policy normalization. Directors noted that the largest banks have strengthened their balance sheets in response to tighter regulation, but low profitability at some banks has created the need for an overhaul of business models, potentially creating headwinds for the economic recovery. Moreover, credit intermediation has been migrating to the shadow banking sector, creating new challenges for supervision and regulation. Against this backdrop, Directors observed that a tighter financing environment could adversely affect the sovereign debt dynamics of many emerging market and developing economies, particularly if coupled with lower growth.

Directors also remained concerned about medium-term risks to the global recovery. Growth in advanced economies could continue to disappoint over a longer period because of lower potential growth or because of a sustained weakness in demand. Directors noted that absent structural reforms, potential growth may be lower than currently projected.

Directors called for greater efforts in most economies to restore growth. They considered that premature normalization in monetary policy should be avoided, given the absence of robust demand growth in advanced economies. Some Directors also saw a need for additional actions by the European Central Bank, while a few Directors cautioned that more time is needed to gauge the effectiveness of policies already introduced. A few other Directors saw little or no scope for further unconventional monetary accommodation in the euro area, as it may not be effective in promoting demand and sustainable growth, and cautioned against maintaining such accommodation longer than necessary, in view of the financial stability risks.

Directors highlighted the need to restructure weak banks and resolve nonviable institutions and to enhance the transmission of monetary policy through balance sheet repair. Moreover, adequate data to monitor the buildup of risks and a mandate for authorities to limit these risks, particularly in the shadow banking sector, are required. Directors broadly supported the use of macroprudential policies to improve the trade-off between financial and economic risk taking as well as regulate and supervise the shadow banking sector, although a number of Directors noted the limited experience regarding the effectiveness of such measures. To ensure adequate incentives for risk taking in the banking sector, some Directors underscored the importance of governance and executive compensation reforms.

Directors stressed that fiscal adjustment in advanced economies needs to be attuned, in pace and composition, to support the immediate recovery as well as lay the ground for medium-term plans (especially in the United States and Japan). More generally, debt and deficit reduction should be designed to minimize their adverse effects on jobs and growth. Directors broadly agreed that for countries with clearly identified infrastructure needs and in which efficient public investment processes exist, an increase in public infrastructure investment could provide a boost to demand as well as raise potential output in the medium term. Directors also broadly noted that in some cases a more supportive fiscal stance could help to bring forward the growth benefits of structural reforms, provided that there is enough fiscal room and that the costs and benefits of the reforms, as well as their implementation prospects, are sufficiently certain. In some countries, fiscal conditions put a premium on structural reforms that can be implemented without budgetary costs.

Directors noted that emerging markets’ efforts to rebalance growth toward domestic sources have supported global growth, although this rebalancing, combined with lower-than-expected growth, has also reduced policy space and raised vulnerabilities for some countries. In this context, the scope for macro-economic policies to support growth, should downside risks materialize, is limited for economies with weak fiscal or external current account positions or high or increasing inflation levels or those facing financial system risks from a sustained period of credit expansion. Directors underscored the importance of reducing these vulnerabilities, including by rebuilding fiscal buffers. They also stressed that continued strong growth in low-income countries calls for greater progress in strengthening policies—by boosting fiscal positions with stronger revenues and rationalizing public spending, achieving greater monetary policy independence, and strengthening public financial management. Directors emphasized the importance for emerging markets to continue managing external financial shocks with exchange rate flexibility, complemented with other measures to limit excessive exchange rate volatility.

Directors underscored the importance of structural reforms to raise potential growth in both advanced and emerging market and developing economies. Within the euro area, these include active labor market policies and better-targeted training programs. Higher public investment in some creditor economies, complemented by policies to encourage private investment, could boost demand in the short term while raising potential output over the medium term. More forceful structural reforms in Japan are also needed to increase labor supply and raise productivity in some sectors through deregulation. Other advanced economies could also raise potential growth with measures to augment human and physical capital and increase labor force participation. Among emerging market and developing economies, the priorities vary. These include removing infrastructure bottlenecks; reforms to education, labor, and product markets; and better government services delivery. While the current account surplus in China has decreased markedly, further progress to gradually shift its growth toward domestic consumption and reduce reliance on credit and investment would help forestall medium-term risks of financial disruption or a sharp slowdown. Joint efforts by both surplus and deficit economies are needed to contribute to a further narrowing of global external imbalances. Further diversification and structural transformation remains a key priority for low-income countries.

Statistical Appendix

The Statistical Appendix presents historical data as well as projections. It comprises six sections: Assumptions, What’s New, Data and Conventions, Classification of Countries, Key Data Documentation, and Statistical Tables.

The assumptions underlying the estimates and projections for 2014–15 and the medium-term scenario for 2016–19 are summarized in the first section. The second section presents a brief description of the changes to the database and statistical tables since the April 2014 World Economic Outlook (WEO). The third section provides a general description of the data and the conventions used for calculating country group composites. The classification of countries in the various groups presented in the WEO is summarized in the fourth section. The fifth section provides information on methods and reporting standards for the member countries’ national account and government finance indicators included in the report.

The last, and main, section comprises the statistical tables. (Statistical Appendix A is included here; Statistical Appendix B is available online.) Data in these tables have been compiled on the basis of information available through September 19, 2014. The figures for 2014 and beyond are shown with the same degree of precision as the historical figures solely for convenience; because they are projections, the same degree of accuracy is not to be inferred.


Real effective exchange rates for the advanced economies are assumed to remain constant at their average levels during the period July 30 to August 27, 2014. For 2014 and 2015, these assumptions imply average U.S. dollar/special drawing right (SDR) conversion rates of 1.537 and 1.534, U.S. dollar/euro conversion rates of 1.354 and 1.344, and yen/U.S. dollar conversion rates of 102.4 and 102.3, respectively.

It is assumed that the price of oil will average $102.76 a barrel in 2014 and $99.36 a barrel in 2015.

Established policies of national authorities are assumed to be maintained. The more specific policy assumptions underlying the projections for selected economies are described in Box A1.

With regard to interest rates, it is assumed that the London interbank offered rate (LIBOR) on six-month U.S. dollar deposits will average 0.4 percent in 2014 and 0.7 percent in 2015, that three-month euro deposits will average 0.2 percent in 2014 and 0.1 percent in 2015, and that six-month yen deposits will average 0.2 percent in 2014 and 2015.

With respect to introduction of the euro, on December 31, 1998, the Council of the European Union decided that, effective January 1, 1999, the irrevocably fixed conversion rates between the euro and currencies of the member countries adopting the euro are as follows:

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Established on January 1, 2008.

Established on January 1, 2011.

Established on January 1, 2001.

Established on January 1, 2014.

Established on January 1, 2009.

Established on January 1, 2007.

See Box 5.4 of the October 1998 WEO for details on how the conversion rates were established.

What’s New

  • The WEO has adopted the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6). Notable changes include the following: (1) Merchanting has been reclassified from services to exports of goods. (2) Manufacturing services on physical inputs owned by others (goods for processing in the BPM5) and maintenance and repair services (repairs on goods in the BPM5) have been reclassified from goods to services. (3) Migrants’ transfers have been removed from capital transfers in the capital account because a change in ownership is no longer imputed. (4) Reverse investment in direct investment has been reclassified so as to present assets and liabilities on a gross basis. (5) A separate financial derivatives category is now included in the financial account, whereas previously it was a subitem under portfolio investment. In addition, the conventional sign for increases in assets (and liabilities) within the financial account is now positive, and balances are now computed as net acquisition of financial assets minus net incurrence of financial liabilities.

  • With the adoption of the BPM6, the Statistical Appendix tables of the WEO have also been revised. Table A13, which previously summarized data on net and private financial flows in emerging market and developing economies, is now a Summary of Financial Account Balances. Table A14 has been deleted because of data constraints. Table A15, Summary of Sources and Uses of World Savings, is now A14, Summary of Net Lending and Borrowing, and Table A16 has been renumbered as A15. Part B of the Statistical Appendix contains most of the same tables as previous WEO reports. Tables B16–B21 have been absorbed into a new Table B15, Summary of Current Account Transactions, and into A13, Summary of Financial Account Balances. As a result, the subsequent tables have been renumbered, so that the former Tables B22 through B27 are now Tables B16 through B21.

  • Following the recent release of the 2011 International Comparison Program (ICP) survey for new purchasing-power-parity benchmarks, the WEO’s estimates of purchasing-power-parity weights and GDP valued at purchasing power parity have been updated. For more detail, see “Revised Purchasing Power Parity Weights” in the July 2014 WEO Update, http://www.imf.org/external/pubs/ft/weo/2014/update/02/index.htm.

  • As in the April 2014 WEO, data for Syria are excluded from 2011 onward because of the uncertain political situation.

  • Because of the ongoing IMF program with Pakistan, the series from which the nominal exchange rate assumptions can be calculated are not made public, as the nominal exchange rate is a market-sensitive issue in Pakistan.

  • As in the April 2014 WEO, the consumer price projections for Argentina are excluded because of a structural break in the data. Please refer to note 5 in Table A7 for further details.

  • Data for Latvia, which were previously excluded from the euro area aggregates because of data constraints, are now included.

  • Projections for Ukraine, which were previously excluded because of the crisis, are once again included.

Data and Conventions

Data and projections for 189 economies form the statistical basis of the WEO database. The data are maintained jointly by the IMF’s Research Department and regional departments, with the latter regularly updating country projections based on consistent global assumptions.

Although national statistical agencies are the ultimate providers of historical data and definitions, international organizations are also involved in statistical issues, with the objective of harmonizing methodologies for the compilation of national statistics, including analytical frameworks, concepts, definitions, classifications, and valuation procedures used in the production of economic statistics. The WEO database reflects information from both national source agencies and international organizations.

Most countries’ macroeconomic data presented in the WEO conform broadly to the 1993 version of the System of National Accounts (SNA). The IMF’s sector statistical standards—the BPM6, the Monetary and Financial Statistics Manual (MFSM 2000), and the Government Finance Statistics Manual 2001 (GFSM 2001)—have been or are being aligned with the 2008 SNA.1 These standards reflect the IMF’s special interest in countries’ external positions, financial sector stability, and public sector fiscal positions. The process of adapting country data to the new standards begins in earnest when the manuals are released. However, full concordance with the manuals is ultimately dependent on the provision by national statistical compilers of revised country data; hence, the WEO estimates are only partially adapted to these manuals. Nonetheless, for many countries the impact on major balances and aggregates of conversion to the updated standards will be small. Many other countries have partially adopted the latest standards and will continue implementation over a period of years.

Composite data for country groups in the WEO are either sums or weighted averages of data for individual countries. Unless noted otherwise, multiyear averages of growth rates are expressed as compound annual rates of change.2 Arithmetically weighted averages are used for all data for the emerging market and developing economies group except data on inflation and money growth, for which geometric averages are used. The following conventions apply:

  • Country group composites for exchange rates, interest rates, and growth rates of monetary aggregates are weighted by GDP converted to U.S. dollars at market exchange rates (averaged over the preceding three years) as a share of group GDP.

  • Composites for other data relating to the domestic economy, whether growth rates or ratios, are weighted by GDP valued at purchasing power parity as a share of total world or group GDP.3

  • Unless noted otherwise, composites for all sectors for the euro area are corrected for reporting discrepancies in intra-area transactions. Annual data are not adjusted for calendar-day effects. For data prior to 1999, data aggregations apply 1995 European currency unit exchange rates.

  • Composites for fiscal data are sums of individual country data after conversion to U.S. dollars at the average market exchange rates in the years indicated.

  • Composite unemployment rates and employment growth are weighted by labor force as a share of group labor force.

  • Composites relating to external sector statistics are sums of individual country data after conversion to U.S. dollars at the average market exchange rates in the years indicated for balance of payments data and at end-of-year market exchange rates for debt denominated in currencies other than U.S. dollars.

  • Composites of changes in foreign trade volumes and prices, however, are arithmetic averages of percent changes for individual countries weighted by the U.S. dollar value of exports or imports as a share of total world or group exports or imports (in the preceding year).

  • Unless noted otherwise, group composites are computed if 90 percent or more of the share of group weights is represented.

Data refer to calendar years, except in the case of a few countries that use fiscal years. Please refer to Table F, which lists the economies with exceptional reporting periods for national accounts and government finance data for each country. For some countries, the figures for 2013 and earlier are based on estimates rather than actual outturns. Please refer to Table G, which lists the latest actual outturns for the indicators in the national accounts, prices, government finance, and balance of payments indicators for each country.

Classification of Countries

Summary of the Country Classification

The country classification in the WEO divides the world into two major groups: advanced economies and emerging market and developing economies.4 This classification is not based on strict criteria, economic or otherwise, and it has evolved over time. The objective is to facilitate analysis by providing a reasonably meaningful method of organizing data. Table A provides an overview of the country classification, showing the number of countries in each group by region and summarizing some key indicators of their relative size (GDP valued by purchasing power parity, total exports of goods and services, and population).

Some countries remain outside the country classification and therefore are not included in the analysis. Anguilla, Cuba, the Democratic People’s Republic of Korea, and Montserrat are examples of countries that are not IMF members, and their economies therefore are not monitored by the IMF. Somalia is omitted from the emerging market and developing economies group composites because of data limitations.

General Features and Composition of Groups in the World Economic Outlook Classification

Advanced Economies

The 36 advanced economies are listed in Table B. The seven largest in terms of GDP—the United States, Japan, Germany, France, Italy, the United Kingdom, and Canada—constitute the subgroup of major advanced economies often referred to as the Group of Seven (G7). The members of the euro area are also distinguished as a subgroup. Composite data shown in the tables for the euro area cover the current members for all years, even though the membership has increased over time.

Table C lists the member countries of the European Union, not all of which are classified as advanced economies in the WEO.

Emerging Market and Developing Economies

The group of emerging market and developing economies (153) includes all those that are not classified as advanced economies.

The regional breakdowns of emerging market and developing economies are Commonwealth of Independent States (CIS), emerging and developing Asia, emerging and developing Europe (sometimes also referred to as “central and eastern Europe”), Latin America and the Caribbean (LAC), Middle East, North Africa, Afghanistan, and Pakistan (MENAP), and sub-Saharan Africa (SSA).

Emerging market and developing economies are also classified according to analytical criteria. The analytical criteria reflect the composition of export earnings and other income from abroad; a distinction between net creditor and net debtor economies; and, for the net debtors, financial criteria based on external financing sources and experience with external debt servicing. The detailed composition of emerging market and developing economies in the regional and analytical groups is shown in Tables D and E.

The analytical criterion source of export earnings distinguishes between categories fuel (Standard International Trade Classification—SITC 3) and nonfuel and then focuses on nonfuel primary products (SITCs 0, 1, 2, 4, and 68). Economies are categorized into one of these groups when their main source of export earnings exceeded 50 percent of total exports on average between 2009 and 2013.

The financial criteria focus on net creditor economies, net debtor economies, and heavily indebted poor countries (HIPCs). Economies are categorized as net debtors when their current account balance accumulations from 1972 (or earliest data available) to 2013 were negative. Net debtor economies are further differentiated on the basis of two additional financial criteria: official external financing and experience with debt servicing.5 Net debtors are placed in the official external financing category when 66 percent or more of their total debt, on average, between 2009 and 2013 was financed by official creditors.

The HIPC group comprises the countries that are or have been considered by the IMF and the World Bank for participation in their debt initiative known as the HIPC Initiative, which aims to reduce the external debt burdens of all the eligible HIPCs to a “sustainable” level in a reasonably short period of time.6 Many of these countries have already benefited from debt relief and have graduated from the initiative.

Low-Income Developing Countries (LIDCs) are countries that were designated Poverty Reduction and Growth Trust (PRGT) eligible in the 2013 PRGT eligibility review and had a level of per capita gross national income less than the PRGT income graduation threshold for non–small states (that is, twice the World Bank International Development Association operational threshold, or US$2,390 in 2011 as measured by the World Bank’s Atlas method); and Zimbabwe.

Table A.

Classification by World Economic Outlook Groups and Their Shares in Aggregate GDP, Exports of Goods and Services, and Population, 20131

(Percent of total for group or world)

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The GDP shares are based on the purchasing-power-parity valuation of economies’ GDP. The number of economies comprising each group reflects those for which data are included in the group aggregates.

Georgia and Turkmenistan, which are not members of the Commonwealth of Independent States, are included in this group for reasons of geography and similarity in economic structure.

South Sudan is omitted from the net external position groups composite for lack of a fully developed database.

Table B.

Advanced Economies by Subgroup

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On July 1, 1997, Hong Kong was returned to the People’s Republic of China and became a Special Administrative Region of China.

Table C.

European Union

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Table D.

Emerging Market and Developing Economies by Region and Main Source of Export Earnings

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Table E.

Emerging Market and Developing Economies by Region, Net External Position, and Status as Heavily Indebted Poor Countries and Low-Income Developing Countries

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Dot instead of star indicates that the net debtor’s main external finance source is official financing.

Dot instead of star indicates that the country has reached the completion point.

Georgia and Turkmenistan, which are not members of the Commonwealth of Independent States, are included in this group for reasons of geography and similarity in economic structure.

South Sudan is omitted from the net external position groups composite for lack of a fully developed database.

Table F.

Economies with Exceptional Reporting Periods1

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Unless indicated otherwise, all data refer to calendar years.

Table G.

Key Data Documentation

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Note: BPM = Balance of Payments Manual (number in parentheses following abbreviation signifies edition); CPI = consumer price index; ESA = European System of National Accounts; SNA = System of National Accounts.

BEA = U.S. Bureau of Economic Analysis; CB = Central Bank; FEO = Foreign Exchange Office; IFS = IMF, International Financial Statistics; MEP = Ministry of Economy and/or Planning; MIAC = Ministry of Internal Affairs and Communications; MoC = Ministry of Commerce; MoF = Ministry of Finance; NESDB = National Economic and Social Development Board; NSO = National Statistics Office; OECD = Organisation for Economic Co-operation and Development; PFTAC = Pacific Financial Technical Assistance Centre; PMO = Prime Minister’s Office; SAFE = State Administration of Foreign Exchange.

National accounts base year is the period with which other periods are compared and the period for which prices appear in the denominators of the price relationships used to calculate the index.

Use of chain-weighted methodology allows countries to measure GDP growth more accurately by reducing or eliminating the downward biases in volume series built on index numbers that average volume component using weights from a year in the moderately distant past.

For some countries, the structures of government consist of a broader coverage than specified for the general government. Coverage: BCG = Budgetary Central Government; CG = Central Government; LG = Local Government; MPC = Monetary Public Corporation, including Central Bank; NFPC = Nonfinancial Public Corporations; NMPC = Nonmonetary Financial Public Corporations; SG = State Government; SS = Social Security Funds; TG = Territorial Governments.

Accounting Standard: A = Accrual; C = Cash.

Nominal GDP is not measured in the same way as real GDP.