The following remarks were made by the Acting Chair at the conclusion of the Executive Board’s discussion of the World Economic Outlook, Global Financial Stability Report, and Fiscal Monitor on September 14, 2012.
The global economy has deteriorated further since the release of the July 2012 WEO Update, and growth projections have been marked down (Table 1.1). Downside risks are now judged to be more elevated than in the April 2012 and September 2011 World Economic Outlook (WEO) reports. A key issue is whether the global economy is just hitting another bout of turbulence in what was always expected to be a slow and bumpy recovery or whether the current slowdown has a more lasting component. The answer depends on whether European and U.S. policymakers deal proactively with their major short-term economic challenges. The WEO forecast assumes that they do, and thus global activity is projected to reaccelerate in the course of 2012; if they do not, the forecast will likely be disappointed once again. For the medium term, important questions remain about how the global economy will operate in a world of high government debt and whether emerging market economies can maintain their strong expansion while shifting further from external to domestic sources of growth. The problem of high public debt existed before the Great Recession, because of population aging and growth in entitlement spending, but the crisis brought the need to address it forward from the long to the medium term.
The authors of this special feature are Christian Bogmans, Lama Kiyasseh, Akito Matsumoto, Andrea Pescatori (team leader), and Julia Xueliang Wang, with research assistance from Lama Kiyasseh and Claire Mengyi Li.
The authors of this chapter are Michal Andrle, Philip Barrett, John Bluedorn (co-lead), Francesca Caselli, and Wenjie Chen (co-lead), with support from Christopher Johns, Adrian Robles Villamil, and Shan Wang. The chapter also benefited from discussions with Yuriy Gorodnichenko, Jay Shambaugh, and from comments by January 2020 internal seminar participants and reviewers.
Global growth slowed again during the second quarter of 2012 after rebounding during the first. The slowing has been observed in all regions. This synchronicity suggests an important role for common factors, many of which reflected wide-ranging spillovers from large country-specific or regional shocks. A first shock was the ratcheting up of financial stress in the euro area periphery in the second quarter. Second, domestic demand in many economies in Asia and Latin America (notably Brazil, China, and India, but also others) slowed, owing not just to weaker external demand from Europe but also to domestic factors. Growth also decelerated in the United States.
The authors of this chapter are Katharina Bergant, Francesco Grigoli, Niels-Jakob Hansen, and Damiano Sandri (lead), with support from Jungjin Lee and Xiaohui Sun. The chapter benefited from insightful comments by Sebnem Kalemli-Özcan and internal seminar participants.
Throughout the past century, numerous advanced economies have faced public debt burdens as high, or higher, than those prevailing today. They responded with a wide variety of policy approaches. We analyze these experiences to draw lessons for today and reach three main conclusions. First, successful debt reduction requires fiscal consolidation and a policy mix that supports growth. Key elements of this policy mix are measures that address structural weaknesses in the economy and supportive monetary policy. Second, fiscal consolidation must emphasize persistent, structural reforms to public finances over temporary or short-lived fiscal measures. In this respect, fiscal institutions can help lock in any gains. Third, reducing public debt takes time, especially in the context of a weak external environment.
Many emerging market and developing economies have done well over the past decade and through the global financial crisis. Will this last? This chapter documents the marked improvement in these economies’ resilience over the past 20 years. These economies did so well during the past decade that for the first time, emerging market and developing economies spent more time in expansion and had smaller downturns than advanced economies. Their improved performance is explained by both good policies and a lower incidence of external and domestic shocks: better policies account for about three-fifths of their improved performance, and less-frequent shocks account for the rest. However, should the external environment worsen, these economies will likely end up “recoupling” with advanced economies. Homegrown shocks could also pull down growth. These economies will need to rebuild their buffers to ensure that they are able to respond to potential shocks on the horizon.
The share of immigrants in advanced economies has risen significantly in recent years, while escalating conflicts have caused large refugee flows that have primarily affected emerging market and developing economies. This chapter examines the drivers of migration, its recent evolution, its possible developments going forward, and its economic impact on recipient countries. Four main findings emerge. First, the costs of migration are high and significantly constrain the ability of individuals to move across borders. Second, the pressures from migration on advanced economies will continue to rise, as the population in emerging market and developing economies is expected to continue to grow over the next 30 years. However, higher incomes in emerging market and developing economies would dampen overall emigration pressures. Third, conflicts are an important driver of migration, especially into emerging market and developing economies. In the future, climate-related disasters could possibly intensify emigration, but the evidence of such pressures is limited to date. Fourth, immigration into advanced economies increases output and productivity both in the short and medium term, but these positive effects are not clearly detected for refugee flows in emerging market and developing economies. The findings of this chapter lend support for two main policy conclusions. First, appropriate labor market and integration policies could magnify the positive macroeconomic effects of immigration. That said, distributional dimensions also need to be considered because immigration may affect, at least temporarily, some groups of people native to the country where the immigrants arrive. Second, international cooperation is needed to address large waves of refugee migration, especially into emerging market and developing economies.