1. Faltering global
economic
growth
Rob Vos
United Nations
Mexico City
18 January, 2012
www.un.org/esa/policy
2. Main messages
1. The world economy is at a critical juncture
– Risk of double-dip in major developed economies
– Growth in emerging economies is moderating
2. Downside risks and uncertainties
– Contagion of sovereign debt crisis, combined with fragility in
banking sector
– Persistent high unemployment
– Political tensions leading to policy paralysis
3. Policy challenges
– No premature fiscal austerity, rather more short-term stimulus
is needed
– … that is internationally coordinated
– … and focused on job creation and investments towards
medium term reforms
– Bolder actions to deal with financial fragilities
– More stable development financing aligned with reforms of
financial system
2
4. Protracted slow growth in
major developed economies
6
4.0
4 3.0 2.9 3.1
2.6
2.2
2.0 2.0 2.0 1.9
1.7 1.5 1.6
1.5
2
0.5
-1
-0.5
-3
-3.5 -3.6
-5
-4.3
-7
-6.3
USA Japan EU15 New EU
2009 2010 2011 2012 2013
4
5. Growth is also moderating
in developing countries
9.2
9
7.5
7.2 7.1
6.9 6.9 6.9
7 6.5 6.7 6.6 6.6
6.0 5.9 6.0
5.6 5.7
5.0 5.1 5.1
5 4.5
4.3 4.3 4.2
3.7
3.3
2.7
3 2.5
2.2
1
-1
-1.0
-2.1
-3
Developing Africa East Asia South Asia Western Asia Latin America
countries
2009 2010 2011 2012 2013 5
6. Despite a rebound, the
recovery in transition
economies remains fragile
6
4.5 4.3
4.0 4.2
4 3.2
2.3
1.7
2
0.5
0
-2
-4
-3.7
-6
-6.9
-8
South-eastern Europe CIS (and Georgia)
2009 2010 2011 2012 2013
6
7. Growth is also moderating
in developing countries
9.2
9
7.5
7.2 7.1
6.9 6.9 6.9
7 6.5 6.7 6.6 6.6
6.0 5.9 6.0
5.6 5.7
5.0 5.1 5.1
5 4.5
4.3 4.3 4.2
3.7
3.3
2.7
3 2.5
2.2
1
-1
-1.0
-2.1
-3
Developing Africa East Asia South Asia Western Asia Latin America
countries
2009 2010 2011 2012 2013 7
8. Recovery in Latin America
follows a decelerating trend
10
2010 2011 2012
8 a/ b/
6
4
2
0
-2 WESP Projection – solid colors
CEPAL Projection - shaded
-4
Latin Argentina Brazil Mexico Venezuela
America
and C.
10. Less favourable external
environment…
• World trade moderating notably
• A dip in the rising trend of
commodity prices, and highly
volatile
• Some capital inflows to emerging
markets reversing and contagious
rise in borrowing costs
10
11. … and major downside risks
and uncertainties
• Persistent high unemployment compounded
by early withdrawal fiscal stimulus has
increased risk of double-dip recession in
developed economies
• Sovereign debt distress spreading to more
countries, combined with fragile banks,
turbulence in financial markets
• Global imbalances lingering but not urgent
problem in itself for short run, but exchange
rate volatility is!!
11
13. The downside scenario
Deviation
GDP growth (%) Downside scenario from baseline
scenario
2011 2012 2013 2012 2013
World 2.8 0.5 2.2 -2.1 -1.0
Developed economies 1.3 -0.9 1.1 -2.1 -1.0
United States 1.7 -0.8 1.1 -2.3 -0.9
Japan -0.5 0.5 1.2 -1.5 -0.8
European Union 1.6 -1.6 1.0 -2.3 -0.6
Economies in transition 4.1 -2.0 3.3 -5.9 -0.9
Developing economies 6.0 3.8 4.5 -1.7 -1.4
Africa 2.7 3.3 3.7 -1.7 -1.5
East and South Asia 7.1 5.6 5.7 -1.2 -1.2
Western Asia 6.6 1.1 2.5 -2.7 -1.8
Latin Am. and Carribean 4.3 0.8 2.4 -2.5 -1.8
LDCs 4.9 5.4 4.0 -0.6 -1.8
13
14. Uncertainties and risks in
Latin America
1. Greatest risk: possible recession in Europe
and the United States with strong spillover to
China
2. Continuing volatility with sharper falls of
commodity prices
3. Volatility of capital flows and exchange rates
4. High exposure of commercial banks in the
region (especially Spanish-owned) to
sovereign debt problems in Europe
5. Reduced fiscal space limiting responsiveness
to renewed global downturn
15. Policy challenges
1. No premature fiscal austerity, rather more
short-term stimulus is needed
2. … that is internationally coordinated
3. … and focused on job creation and
investments towards medium term
reforms for sustainable development
4. Bolder actions to deal with financial
fragilities
5. More stable development financing
aligned with reforms of financial system15
16. More coordinated stimulus,
not less, is needed to move out
of jobs crisis
5 Policy
4.1 4.0 4.0 4.0
4 coordination 3.9
3.2
3 2.6
2.8
2 1.4 2.2
1
0.5
0
-1
-2
-2.3
-3
2006 2007 2008 2009 2010 2011 2012 2013
16
17. Faltering global
economic
growth
United Nations,
17 January, 2012
www.un.org/esa/policy
