Achieving China’s Great Promise


Murtaza SyedBy Murtaza Syed

(Version in 中文)

Anticipation of the U.S. Federal Reserve’s exit from quantitative easing has dominated headlines in recent weeks. Half a world away, less conspicuously, but no less importantly, China, the globe’s second largest economy, is designing its own policy adjustments: firstly, unwinding the fiscal and monetary stimulus that helped shield it from the Great Recession and lifted global growth (but which also created some vulnerabilities), and secondly transitioning out of a growth model that has generated spectacular growth over the last three decades, but which is now running out of fuel.

Managed well, these twin adjustments would allow China to prolong its economic miracle in a sustainable way, with a significant positive impact for the rest of the world.

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Japan’s Three Arrows―Will They Fly?


Jerry SchiffBy Jerry Schiff 

(Versions in 日本語l and 中文)

Discussions in Japan of the “three arrows” of Abenomics—the three major components of Prime Minister Shinzo Abe’s economic plan to reflate the economy—are rampant among its citizens as well as economists, journalists and policy-makers worldwide. Even J-Pop groups are recording paeans to the economic policy named after the newly-elected premier.  It is clear that “Abenomics” has been a remarkable branding success. But will it equally be an economic triumph?

We think it can be, and initial signs are positive.  But such success is not assured. It will require difficult decisions as the country moves into largely uncharted territory. And much will depend on changing expectations within the country.

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Africa: Second Fastest-Growing Region in the World


Antoinette SayehBy Antoinette M. Sayeh 

Sub-Saharan Africa is the second fastest-growing region of the world today, trailing only developing Asia.  This is remarkable compared to the current complicated state of the global economy, with Europe still struggling and the United States slowly on the mend.

In 2012, Sub-Saharan Africa maintained solid growth, with output growth at 5 percent on average. The factors that have supported the region through the Great Recession—strong investment, favorable commodity prices, and generally prudent macroeconomic management—continued to be at play.

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Saving Latin America’s Unprecedented Income Windfall


by Gustavo Adler and Nicolás Magud

(Versions in Español and Português)

Commodity exporting countries in Latin America have benefited strongly from the commodity price boom that began around 2002. And the accompanying improvements in public and external balance sheets have fed a sense that this time the macroeconomic response to the terms-of-trade boom has been different (and more prudent) than in past episodes. But, has it?

In our recent work, we analyze the history of Latin America’s terms-of-trade booms during 1970–2012 and quantify the associated income windfall (i.e., the extra income arising from improved terms-of-trade). We also document saving patterns during these episodes and assess the extent of the “effort” to save the income windfall.

Our findings suggest that, although the additional income shock associated to the recent terms-of-trade boom is unprecedented in magnitude, the effort to save it has been lower than in past episodes.

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Inclusive and Sustained Growth in Asia: The Role of Fiscal Policy


ASinghBy Anoop Singh

(Versions in 中文 and 日本語)

Fiscal management has improved in Asia over the past decade. It has become more responsive to economic conditions and thereby helped stabilize growth, especially during the global financial crisis. While these are important achievements, major challenges still lie ahead—as our latest Asia and Pacific Regional Economic Outlook points out.

What are these key challenges? In a nutshell, fiscal policy can, and should do more to make Asia’s growth sustainable and more inclusive.

In the near term, budget consolidation has to proceed as the recovery takes hold to rebuild the fiscal space needed to respond to future output fluctuations.

At the same time several emerging and low income economies need to create room for higher infrastructure and social spending to support long-term growth, reduce income inequality, and fight poverty.

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After a Golden Decade, Can Latin America Keep Its Luster?


Alejandro WernerBy Alejandro Werner

(Versions in Español and Português)

Latin America continues to be one of the fastest growing regions in the world, even though growth slowed down a bit in 2012. Many economies in the region are operating at or near potential, inflation remains generally low, and unemployment is at historically low levels.

In the near term, the region will continue to benefit from easy external financing and relatively high commodity prices. In our May 2013 Regional Economic Outlook, we project that the region will expand by about 3½ percent in 2013. In Brazil—the region’s largest economy—economic activity is strengthening, driven by improving external demand, measures to boost investment, and the impact of earlier policy easing. In the rest of Latin America, output growth is expected to remain near potential.

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India’s Economy: Stamina Is The Name Of The Game


by Laura Papi and Rahul Anand*

So far 2013 has been a breath of fresh air in terms of economic news: financial markets have rallied and economic indicators have started to surprise on the upside. In India, the rupee has strengthened and the Bombay Stock Exchange index (Sensex) crossed the 20,000 mark for the first time in two years.  Industrial production has started picking up.

So is India’s growth about to go back to 8-9 percent? The short answer is no. But we need to look back to understand why India’s growth has decelerated to a decade low and why the slump, which has hit investment particularly hard, has persisted for over a year. As structural problems are at the root of the slowdown, so structural reforms must be at the core of the solution.

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