Brooking update on IMF World Economic Outlook

I had posted a while back on How useful World Economic Outlook’s database is and can be used to draw so much analysis. It was done by Brookings based economists.

I got an email from one of the authors Geoffrey Gertz informing about the updated version of the study.

Dear Mr. Agrowal, 
 
We noticed you posted a nice commentary on Mostly Economics about a publication we wrote in the spring on tracking the global economic crisis, and wanted to alert you to some recent work updating that analysis: Tracking the Global Economic Recovery: Insights on the IMF’s New World Economic Outlook.  In it we look at the extent to which the world’s major economies are bouncing back from the crisis, and consider some of the longer term political economy challenges of adjusting to a “new normal”.  Hope you enjoy it.
 
http://www.brookings.edu/reports/2009/10_financial_crisis_linn.aspx

Best,
Geoff

Fairly interesting research as usual.  They point how IMF has revised its growth forecasts showing stabilization of economies. As in free fall has ended.  The Chinese growth is pretty interesting:

Chinese Premier Wen Jiabao took to the stage at the World Economic Forum, insisting that the country could still make its growth target of 8 percent. Wen admitted that given the global economic climate, meeting this target would “be a tall order” and could only “be attained with hard work.” Eight months later, the IMF now believes China will exceed this 8 percent target after all. Remarkably, the IMF’s latest 2009 growth projection for China is only 0.7 percentage points below the forecast from the outset of the crisis.

If these were normal times with the U.S. and Eurozone growing at about 3 percent, China’s 8.5 percent growth this year would contribute as much to global growth as that of the U.S. or Eurozone. But with the U.S. and Eurozone far below 3 percent growth for the year, China’s robust growth takes on special significance in this recovery period. In recent weeks, renewed Chinese demand has been credited with everything from boosting machinery exports from Germany and Korea to renewed commodity sales in Brazil and Australia.

Hmm…

The authors then look at difference in average growth rates in 2003-07 and average growth rates in 2010-14. The situation does not look good at all. It is particularly alarming in Russia, Venezuela and Iran. The leaders have used populist policies and have spent hugely in good times. Now there is huge pressure. They end the article with political economy implications:

Over the past five years, Putin, Chavez, and Ahmadinejad all used their resurgent economies as a foundation for bolder and more audacious actions abroad. Whether or not the reverse—waning global influence in the face of a weakening economy—will hold depends on how these leaders respond to the need for austerity. Economic pressures could compel these regional powers to turn inward and focus on domestic needs rather than asserting their ideologies abroad. Conversely, if they perceive themselves to be under threat, the appeal of distracting foreign (mis)adventures may become impossible to resist.

The IMF forecasts are, of course, not set in stone. Indeed, a focus of our analysis has been how these forecasts have changed over time. Neither Russia, Iran, nor Venezuela’s fate is sealed; there are many factors that could recast their economic outlooks over the coming five years, most notably another run up in oil prices. Nevertheless, the disconnect between the 2003-07 boom—when these countries, along with the global economy as a whole, enjoyed above average growth—with the present forecast, does raise interesting political economy questions for these regional powers and others.

Only time will tell what will happen to these economies. But yeah political economy scenarios don’t look good at all.

One Response to “Brooking update on IMF World Economic Outlook”

  1. Tweets that mention Brooking update on IMF World Economic Outlook « Mostly Economics -- Topsy.com Says:

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