WESP Update
per Mid-2012
Darkening skies over
the world economy
New York, 7 June 2012
Jomo K.S. & Rob Vos
United Nations
www.un.org/esa/policy
Main messages
1.
Global economic slowdown
•
•
•
2.
Much of Europe has entered recession
Considerable slowdown worldwide
Jobs crisis continues
High risk of dangerous downward spiral
•
•
3.
Escalation of euro area crisis poses global threat
Risk of sharp rise in global energy prices and heightened
commodity price and capital flow volatility
Breaking out of the vicious cycle
•
•
•
•
Coordinated efforts needed to shift away from self-defeating
fiscal austerity and towards renewed stimulus
Redesign fiscal policies to more directly support job creation
and green growth
Coordinate monetary policy and accelerate financial sector
reforms
2
Enhance development financing
A synchronized global slowdown
10
8
6
4
2
0
-2
-4
-6
-8
2007
2008
Developed Economies
2009
2010
Economies in Transition
2011
2012
2013
Developing Economies
3
Developed economy vicious cycle
High
unemployment
Fiscal
austerity &
sovereign
debt risk
Low
growth
trap
Financial
sector
fragility
Deleveragin
g by firms
and
households
4
The jobs crisis continues –
unemployment rising in euro area
Unemployment rates in developed regions
(percentage of labour force, seasonally adjusted)
12
9
6
United States (LHS)
Euro Area
Jan-2012
Jul-2011
Jan-2011
Jul-2010
Jan-2010
Jul-2009
Jan-2009
Jul-2008
Jan-2008
Jul-2007
0
Jan-2007
3
Weakness in developed countries is
spilling over to developing countries
• Weakening trade growth
• Global slowdown also starting to affect South-South trade
• Ongoing exchange rate and capital flow volatility
• Deleveraging (especially by European banks) and flight to
safety
• Capital outflows from emerging countries
• Depreciation pressure on some emerging country currencies
• Continued commodity price volatility
• Large oil price swings over the first half of the year
• Downward pressure on industrial metal prices
Sluggish growth in developed
economies, recession looms for
Europe
6
4.4
3
3
4
1.7
2.1 2.3
1.7
2.1
2.3
2
1.4
2
-1
2.8
1.7
1.1
-0.1
-0.7
-3
-5
-3.5
-3.6
-4.3
-7
USA
-6.3
2009
Japan
2010
EU15
2011
2012
New EU
2013
7
Growth in most developing regions
slowing
9.2
9
7.1
7
7.1
6.9
6.9
6.5
3
4.8
4.6
5
6.2
6.1
6.1
5.7
5.1
4.4
4.2
2.2
6.0
5.6
4.3
4.0
4.2
3.7
2.1
1
-1
-1.0
-2.1
-3
Africa
East Asia
2009
South Asia
2010
2011
Western Asia
2012
2013
Latin America
8
How to avert a new global
recession?
Need to address all four major weaknesses
simultaneously
Requires fundamental policy shift:
• Coordinate fiscal policies to provide new shortterm stimulus, focus on fiscal sustainability for
medium term
• Redesign fiscal policy and align with structural
policies for job creation and green growth
• Coordinate monetary policy to stem currency
and capital volatility and accelerate financial
regulatory reform to address financial fragility
• Ensure adequate development finance
9
Dealing with the growth and jobs crisis
through sustainable global rebalancing
GDP growth (in per cent)
Europe, Japan & other
developed economies
United States
6
Transition &
developing economies
6
10
China and India
4
Scenario
8
4
6
2
2
4
Baseline
0
Transition & other
developing economies
2
0
0
-2
-2
-2
-4
-4
-4
2009
2011
2013
2015
2009
2009
2011
2013
2011
2013
2015
2015
10
Dealing with the growth and jobs crisis
through sustainable global rebalancing
Employment ratios (per cent of working age population)
Europe, Japan & other
developed economies
United States
70
Scenario
68
66
Transition &
developing economies
70
70
68
68
66
66
64
64
64
62
62
62
60
60
60
Baseline
58
58
2007
2009
2011
2013
2015
China and India
Transition & other
developing economies
58
2007 2009 2011 2013 2015
2007 2009 2011 2013 2015
11