The Slow Recovery Continues


WEO

By Olivier Blanchard

(Versions in Español中文,  日本語Русский )

The recovery continues, but it remains weak, indeed a bit weaker than we forecast in April.

We have revised our forecast for world growth in 2014 from 3.7 percent in April to 3.4 percent today. This headline number makes things look worse than they really are. To a large extent, it reflects something that has already happened, namely the large negative US growth rate in the first quarter. But it is not all due to that. It also reflects a number of small downward revisions, both in advanced and in emerging economies.

The overall story remains largely the same as before:

Advanced economies are still confronted with high levels of public and private debt, which act as brakes on the recovery. These brakes are coming off, but at different rates across countries.

Emerging markets are slowing down from pre-crisis growth rates. They have to address some of their underlying structural problems, and take on structural reforms. At the same time, they have to deal with the implications of monetary policy normalization in the US.

Let me take you on the usual tour of the world.

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Euro Area: An Unbalanced Rebalancing?


By John Bluedorn and Shengzu Wang

Since the financial crisis, the euro area current account, made up mostly of the trade balances of the individual countries, has moved from rough balance into a clear surplus. But the underlying rebalancing across economies within the euro area has been highly asymmetric, with some debtors, like Greece, Ireland, and Spain, seeing large current account improvements (sometimes into surplus), while creditors, like Germany and the Netherlands, have basically maintained their surpluses (Chart 1). A set of new staff papers look at the drivers of the improvements in debtor current accounts and the persistence of creditor current accounts, and whether these developments are a cause for concern.

Euro Area Current Account.Chart1

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Euro Area – Q&A on QE


By Reza Moghadam and Ranjit Teja 

As inflation has sunk in the euro area, talk of quantitative easing (QE)—and misgivings about it—have soared. Some think QE is not needed; others that it would not work; and yet others that it only creates asset bubbles and may even be “illegal.” In its latest report on the euro area, the IMF assesses recent policy action positively but adds that “… if inflation remains too low, the ECB should consider a substantial balance sheet expansion, including through asset purchases.” Given all the reservations, would the juice be worth the squeeze?

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As Demand Improves, Time to Focus More on Supply


2010 WEO BLANCHARD By Olivier Blanchard

(Version in  FrançaisEspañol, Русский, عربي中文  and 日本語)

The dynamics that were emerging at the time of the October 2013 World Economic Outlook are becoming more visible. Put simply, the recovery is strengthening.

In our recent World Economic Outlook, we forecast world growth to be 3.6 percent this year and 3.9 percent next year, up from 3.0 percent last year.

In advanced economies, we forecast growth to reach 2.2 percent in 2014, up from 1.3 percent in 2013.

The recovery which was starting to take hold in October is becoming not only stronger, but also broader.  The various brakes that hampered growth are being slowly loosened.   Fiscal consolidation is slowing, and investors are less worried about debt sustainability. Banks are gradually becoming stronger. Although we are far short of a full recovery, the normalization of monetary policy—both conventional and unconventional—is now on the agenda.

Brakes are loosened at different paces however, and the recovery remains uneven.

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Jobs and Growth: Supporting the European Recovery


MD's Updated HeadshotBy Christine Lagarde

(Version in Français and Español)

As we begin the new year, Europe confronts both good and bad news. First the good news. Growth is finally picking up in the euro area as it is slowly emerging from the deep recession.  The bad news? Still nearly 20 million people are unemployed. Until the effects on employment have been reversed, we cannot say that the crisis is over.

Two trends are particularly troubling, now and for the future. First, the high level of long-term unemployment gives me great cause for concern: almost half of those without a job have been unemployed for more than a year. Second, I still worry about the large number of young people without jobs: nearly one quarter of Europeans under the age of 25 who are looking for a job cannot find one. In Italy and Portugal, more than one third of under-25s are unemployed, and in Spain and Greece more than one half are.

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Jobs and Growth in Europe


The IMF’s Christine Lagarde is in Brussels on January 28 to talk about jobs and growth in Europe.

The good news is growth is finally picking up in the euro area as it is slowly emerging from the deep recession.  But nearly 20 million people are unemployed.

The most effective way of boosting jobs is to get growth going again.

The IMF has a new book that analyzes today’s challenges head-on and proposes a roadmap for the continent’s recovery.

Christine Lagarde will discuss the book along with Wolfgang Schäuble, Finance Minister of Germany, and Luis de Guindos, Minister of Economy and Competitiveness of Spain. The event will be chaired by Fabian Zuleeg, Chief Executive of the European Policy Centre.

Watch the live webstream on this page from 8.00-9.30 a.m. (Central European Time).

Recovery Strengthening, but Much Work Remains


WEOBy: Olivier Blanchard

(Versions in Español عربيРусский,  Français, and 中文 )

I want to take a moment today to remember our colleague Wabel Abdallah, who was our resident representative in Afghanistan and who, as many of you know, was killed in the terrorist attack in Kabul on Friday. We are mourning a colleague, a friend to many of us, above all a dedicated civil servant who represented the best the Fund has to offer, and gave his life in the line of duty, helping the Afghan people. Our hearts go out to his family and to the many victims of this brutal attack.

Let me now turn to our update of the World Economic Outlook and distill its three main messages:

First, the recovery is strengthening.  We forecast world growth to increase from 3% in 2013 to 3.7% in 2014.  We forecast growth in advanced economies to increase from 1.3% in 2013 to 2.2% in 2014.  And we forecast growth in emerging market and developing economies to increase from 4.7% in 2013 to 5.1% in 2014.

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The World’s Three-Speed Economic Recovery


WEOBy Olivier Blanchard

(Versions in عربي , 中文, 日本語, Русский, and Español)

The main theme of our latest outlook is one that you have now heard for a few days: we have moved from a two-speed recovery to a three-speed recovery.

Emerging market and developing economies are still going strong, but in advanced economies, there appears to be a growing bifurcation between the United States on the one hand, and the Euro area on the other.

This is reflected in our forecasts. Growth in emerging market and developing economies is forecast to reach 5.3% in 2013, and 5.7% in 2014. Growth in the United States is forecast to be 1.9% in 2013, and 3.0% in 2014. In contrast, growth in the Euro area is forecast to be -0.3% in 2013, and only 1.1% in 2014.

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Europe: Toward A More Perfect Union


Nemat Shafik 4

By Nemat Shafik

During the years that followed the euro’s introduction, financial integration proceeded rapidly and markets and governments hailed it as a sign of success. The widespread belief was that it would benefit both south and north—capital was finally able to flow to where it would best be used and foster real convergence.

But in fact, a lasting convergence in productivity did not materialize across the European Union. Instead, a competitiveness divide emerged. As the financial crisis gripped the euro area in 2010, these and other problems came to the fore.

Three years later, the financial symptoms of the crisis are thankfully receding with a new sense of optimism in markets. But the underlying problems—lack of convergence of productivity and the structural flaws in the architecture of the monetary union—have only been partially addressed.

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We May Have Avoided the Cliffs, But We Still Face High Mountains


WEO

by Olivier Blanchard

Version in Español  and عربي

Optimism is in the air, particularly in financial markets. And some cautious optimism may indeed be justified.

Compared to where we were at the same time last year, acute risks have decreased. The United States has avoided the fiscal cliff, and the euro explosion in Europe did not occur. And uncertainty is lower.

But we should be under no illusion. There remain considerable challenges ahead. And the recovery continues to be slow, indeed much too slow.

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