country and regional perspectives
As discussed in Chapter 1, the global recovery is continuing, but its strength is not yet assured. Economic prospects remain uneven across countries and regions (Figure 2.1). In general, the pace of recovery is expected to be faster in economies that had stronger fundamentals before the crisis, smaller output losses during it, and now have moreroom for policy maneuver and deep links with fast-growing trading partners.1 China’s increasingly wide trading network is driving growth prospects in numerous economies, especially commodity exporters. Strong internal dynamics are supporting near-term growth in other emerging economies, too. However, economic prospects are subdued in major advanced economies, where much-needed policy adjustmentshave only just begun—in the form of financial sector repair and reform and medium1See Chapter 2 of the April 2010 World Economic Outlook and IMF (2010a).
term fiscal consolidation. This will weigh on growth in emerging economies, raising the need to boost domestic sources of demand. At the same time, capital will continue to flow toward strong emerging and developing economies, induced byrelatively good growth prospects and favorable interest rate differentials. This chapter begins with Asia, which is leading the global recovery. Then it turns to North America, where there is renewed concern that the recovery may be stalling, with significant implications for the rest of the world. Next, the chapter reviews Europe’s economic and policy challenges, which in many ways mirror those at theglobal level: the need for demand rebalancing within the region, financial sector repair, and medium-term fiscal consolidation. It then outlines the wide range of developments and prospects in Latin America and the Caribbean (LAC), the Commonwealth of Independent States (CIS), the Middle East and North Africa (MENA), and subSaharan Africa.
Figure 2.1. Average Projected Real GDP Growth during2010–11
Below 0 Between 0 and 2 Between 2 and 5 Above 5 Insufficient data Source: IMF staff estimates.
International Monetary Fund | October 2010
wOrld ecOnOmic OutlOOk: recOvery, risk, and rebalancing
asia is advancing with resilience
Asia entered the global crisis on a strong footing and is continuing to lead the global recovery (Figure 2.2). In most parts of theregion, resilience in domestic demand—thanks in part to proactive policy stimulus—has offset the drag from net exports (Figure 2.3). The handoff from publicsector-driven to private-sector-driven growth is well under way in most Asian countries. Industrial production and retail sales have been strong in China and India, among others. Robust activity in these countries in turn is helping power growthin the rest of Asia. In fact, China’s strong and sustained growth over the past several years has served as a linchpin for global trade, benefiting exporters of commodities (for example, Australia, Indonesia, New Zealand) and capital goods (for example, Germany, Japan, some NIEs).2,3 Moreindustrialized Asian economies comprise Hong Kong SAR, Korea, Singapore, and Taiwan Province of China. 3WhileChina continues to be an important conduit in Asia’s global supply chain, the much faster pace of increase in emerging
over, unlike in previous recoveries, a turnaround in private capital inflows has bolstered domestic demand by providing access to external financing. The region is projected to grow by about 7.9 percent in 2010 and 6.7 percent in 2011 (Table 2.1). Activity is projectedto moderate from the second half of 2010 and in 2011 in line with the winding down of policy stimulus and policy tightening in economies facing demand pressures, as well as downdrafts from policy adjustments in advanced economies. Near-term growth performance will vary across countries because of differences related to the strength of stimulus and private demand along with underlying economic and...