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IMF / WORLD ECONOMIC OUTLOOK
STORY: IMF / WORLD ECONOMIC OUTLOOK
TRT: 2.36
SOURCE: IMF
RESTRICTIONS: NONE
LANGUAGE: ENGLISH / NATS
DATELINE: 24 JANUARY 2012, WASHINGTON, DC
RECENT, ATHENS, GREECE
1. Zoom out, from locked door to store front
2. Wide shot, boarded up shop
24 JANUARY, 2012, WASHINGTON, DC
3. SOUNDBITE (English) Olivier Blanchard, Economic Counselor, International Monetary Fund (IMF):
“So the outlook for growth is mediocre and it could be worse. Mediocre because we have two main brakes on growth. The one is that fiscal consolidation has to take place not too fast, but it has to take place and that's going to slow down demand and growth. And then we have bank deleveraging which is also going to limit credit, limit growth.”
RECENT, BRUSSELS, BELGIUM
4. Various shots, European Parliament
24 JANUARY, 2012, WASHINGTON, DC
5. SOUNDBITE (English) Olivier Blanchard, Economic Counselor, International Monetary Fund (IMF):
“Emerging markets are already affected. We see it through trade, slow activity in advanced countries decreases trade, decreases their exports, so we are already seeing this. And I think the financial uncertainty means that they are going to be exposed to a lot of uncertainty, probably very volatile capital flows. In general, so far we don't think it's going to be catastrophic. It's going to be there.”
RECENT, ARLINGTON, VIRGINIA
6. Various shot, people inside mall
24 JANUARY, 2012, WASHINGTON, DC
7. SOUNDBITE (English) Olivier Blanchard, Economic Counsellor, International Monetary Fund (IMF):
“Fiscal consolidation: it's important to do it, but if you do it too fast, you really can kill growth. So there there has to be the right speed, a very difficult issue. It has to be determined in each country, but it's very important not to go too fast, not to go too slow. Bank deleveraging in the short-run: we should try to limit the credit crunch as much as we can. This means using public capital maybe to recapitalize banks in Europe. There are a number of things we can do. And then eliminating the uncertainty about the European crisis. What this means in practice is to the extent that the governments are taking the right measures, which they are, there has to be a liquidity provision to make sure that they can borrow at a decent rate."
RECENT, WASHINGTON, DC
8. Med shot, IMF HQ
RECENT, BRUSSELS, BELGIUM
9. Wide shot, European Council Building
24 JANUARY, 2012, WASHINGTON, DC
10. SOUNDBITE (English) Olivier Blanchard, Economic Counselor, International Monetary Fund (IMF):
“If you don't have strong growth, there is not much you can do about unemployment. You can make it less painful. It's very important to keep unemployment benefits for the long-term unemployed for the time being, but one has to be realistic that higher growth is the only way.”
RECENT --
11. Wide shot, worker with container hanging from crane
12. Med shot, lab staff at microscope
With intensifying strains in the euro area weighing on the global outlook, the International Monetary Fund (IMF) has sharply cut its forecast for world growth this year, saying prospects have dimmed, and risks to financial stability have increased.
In an update to its World Economic Outlook, the IMF said that the euro area would fall into a mild recession in 2012 after the euro area crisis entered a “perilous new phase” toward the end of last year, affecting other parts of the world, including the United States, emerging markets, and developing countries.
“So the outlook for growth is mediocre and it could be worse. Mediocre because we have two main brakes on growth. The one is that fiscal consolidation has to take place not too fast, but it has to take place and that's going to slow down demand and growth. And then we have bank deleveraging which is also going to limit credit -- limit growth,” said Olivier Blanchard, the IMF’s Economic Counsellor.
Overall, activity in the advanced economies is now projected to expand by just 1.2 percent in 2012—a downward revision of ¾ percentage points relative to the forecast last September—picking up to a still tepid 1.9 percent the next year. The global growth outlook for this year is 3.3 percent.
In 2012–13, growth in emerging and developing economies is expected to average 5¾ percent—a significant slowdown from the 6¾ percent growth registered in 2010–11, and about ½ percentage point lower than projected in the September 2011 WEO. This reflects the deterioration in the external environment, as well as the slowdown in domestic demand in key emerging economies.
Despite a substantial downward revision of ¾ percentage point, developing Asia is still projected to grow most rapidly at 7½ percent on average in 2012–13.
“Emerging markets are already affected. We see it through trade, slow activity in advanced countries decreases trade, decreases their exports, so we are already seeing this. And I think the financial uncertainty means that they are going to be exposed to a lot of uncertainty, probably very volatile capital flows. In general, so far we don't think it's going to be catastrophic. It's going to be there,” Blanchard said.
The adverse spillover effects are expected to be the largest for central and eastern Europe (CEE), given the region’s strong trade and financial linkages with the euro area economies.
The impact on other regions is expected to be relatively mild, as macroeconomic policy easing is expected to largely offset the effects of slowing demand from advanced economies and rising global risk aversion. For many emerging and developing economies, the strength of the forecasts also reflects relatively high commodity prices.
The IMF said the most immediate policy challenge is to restore confidence and put an end to the crisis in the euro area by supporting growth, while sustaining fiscal adjustment, containing deleveraging, and providing more liquidity and monetary accommodation.
“Fiscal consolidation: it's important to do it, but if you do it too fast, you really can kill growth. So there there has to be the right speed, a very difficult issue. It has to be determined in each country, but it's very important not to go too fast, not to go too slow. Bank deleveraging in the short-run: we should try to limit the credit crunch as much as we can. This means using public capital maybe to recapitalize banks in Europe.
There are a number of things we can do. And then eliminating the uncertainty about the European crisis. What this means in practice is to the extent that the governments are taking the right measures, which they are, there has to be a liquidity provision to make sure that they can borrow at a decent rate,” Blanchard said.
In other major advanced economies, the key policy requirements are to address medium-term fiscal imbalances and to repair and reform financial systems, while sustaining the recovery. In emerging and developing economies, near-term policy should focus on responding to moderating domestic growth and to slowing external demand from advanced economies.
“If you don't have strong growth, there is not much you can do about unemployment. You can make it less painful. It's very important to keep unemployment benefits for the long-term unemployed for the time being, but one has to be realistic that higher growth is the only way,” Blanchard said.
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