Global Economic Outlook

The Global Economic Outlook: More Bad News Ahead Pam Woodall Asia Economics Editor, The Economist June 2008

Key points ,[object Object],[object Object],[object Object],[object Object]

Global growth: fastest for over 30 years ,[object Object],[object Object],[object Object],World GDP, % increase Five years ending:

US personal saving ,[object Object],[object Object],as % of disposable income American consumers on a binge

The biggest bubble in history Ratio of US house prices to average income 1975-2000 average = 100 Source: The Economist

The worst is now over? ,[object Object],[object Object],[object Object]

The biggest house-price crash in history Source: Robert Shiller US house prices, % change on previous year

Falling house prices will hit consumer spending

Comparison of financial crises Total financial losses Source: IMF

The biggest oil shock in history ,[object Object],[object Object],Crude oil price, $/barrel

America in the jaws of recession ,[object Object],[object Object],[object Object],[object Object]

House Prices, % change 1997-2007 Source: The Economist

Personal Saving as % disposable income ,[object Object],[object Object],France US Less sign of a binge in Europe UK Germany

Don’t write off Japan ,[object Object],[object Object],[object Object],% growth annual average 2003-07

Europe and Japan keep chugging as the US economy stalls GDP, % increase

If America sneezes will Asia catch a cold? ,[object Object],[object Object],[object Object],Emerging Asia’s GDP US domestic demand

Asia’s non-US exports remain strong ,[object Object],[object Object],Asia’s exports % change on year ago to rest of the world to US

China’s growth is driven largely by domestic demand NOT exports Breakdown of China’s GDP growth %

Housing bubbles everywhere but Asia % change in house prices relative to average income 2000-2007

Asian economies’ exposure to a US recession ,[object Object],[object Object]

Asia hit hard by America’s 2001 recession

Asia will slow by much less than in 2001 GDP growth , %

The return of inflation ,[object Object],[object Object],[object Object],CPI inflation, % G7 Developed economies Emerging economies

Inflation: not just food prices Money-supply growth 2000=100 Food as % of consumer-price index Emerging economies G7

Asia is more important than the US as a driver of global growth % of world GDP growth * * At purchasing-power parity

Asia leaps ahead % of world GDP* Asia * At purchasing-power parity EU US

The world’s five biggest economies 2006 2030 Goldman Sachs forecasts US =100* * GDPs converted at market exchange rates

The dwindling dollar Trade-weighted index, January 1973=100

The dollar has further to fall ,[object Object],[object Object],[object Object]

The new world order ,[object Object],[object Object],[object Object]

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