Figure 1.1.1. Growth Forecast Errors and Fiscal Consolidation Plans
Activity over the past few years has disappointed more in economies with more aggressive fiscal consolidation plans, suggesting that fiscal multipliers used in making growth forecasts have been systematically too low. This relationship holds for different components of GDP, the unemployment rate, and forecasts made by different institutions.
Growth Forecast Errors and Fiscal Consolidation Plans
Activity over the past few years has disappointed more in economies with more aggressive ﬁscal consolidation plans, suggesting that ﬁscal multipliers used in making growth forecasts have been systematically too low. This relationship holds for different components of GDP, the unemployment rate, and forecasts made by different institutions.
Figure 1.1. Global Indicators
The global manufacturing cycle has turned down again. Industrial production has slowed sharply in advanced and emerging market and developing economies and so has world trade. The deterioration is broad based. Unemployment in advanced economies remains appreciably above precrisis levels and is elevated in eastern Europe and the Middle East and North Africa.
Figure 1.5. Monetary Policies
Expectations are for very accommodative monetary policies in the major advanced economies. Real interest rates are also low in many emerging market and developing
economies, and several economies have cut their policy rates in the past six months. However, only a few economies implemented large cuts. Over the medium term, policy rates will have to be raised, but considering the downside risks to the outlook, many central banks can afford to hold steady now or ease further. In advanced economies, central bank balance sheets have expanded appreciably, but their size is not unusual compared with those of various emerging market economies.
Figure 1.11. Risks to the Global Outlook
Risks around the WEO projections have risen, consistent with market indicators, and remain tilted to the downside. The oil price and inflation indicators point to downside risks to growth, while S&P 500 options prices and the term spread suggest some upside risk.
Figure 1.17. Global Imbalances
Global current account balances narrowed sharply during the Great Recession and are not projected to widen again, except for the contribution of emerging Asia. Exchange rate developments since the onset of the crisis have been consistent with global demand rebalancing. However, the appreciation of external surplus currencies has stopped during the past eight months. IMF staff assessments suggest that current account balances remain larger than desirable in emerging Asia and weaker elsewhere. Sustained accumulation of international reserves in these economies is contributing to global current account imbalances and associated vulnerabilities that are larger than desirable.
International Monetary Fund