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IMF / WORLD ECONOMIC OUTLOOK PREVIEW
STORY: IMF/ WORLD ECONOMIC OUTLOOK PREVIEW
TRT: 2:46
SOURCE:IMF
RESTRICTIONS: NONE
LANGUAGE: ENGLISH / NATS
DATELINE: RECENT
NEW YORK CITY
1. Various, aerial shots, skyline
WASHINGTON DC
2.SOUNDBITE (English) Olivier Blanchard, Chief Economist, IMF:
“I think the recovery is strongest in the U.S. in the sense that for the most part the brakes are gone. People can borrow at low rates, fiscal consolidation is now fairly slow. So everything is right and interest rates are still very low and will remain as long as they need to be low. So I think the U.S. recovery is the strongest among advanced economies and therefore in a way it’s pulling the world.”
ROME, ITALY
3. Various shots, piazzas
WASHINGTON DC
4.SOUNDBITE(English) Olivier Blanchard, Chief Economist, IMF:
“I think the euro core and the UK are in good solid shape with variations, but in general okay. The euro periphery, southern periphery, Spain, Portugal, Italy, still have a tougher time and so there although the growth numbers are positive, which is good news, no time to relax.”
LONDON, UK
5. Various shots, prices in shop windows
WASHINGTON DC
6.SOUNDBITE(English) Olivier Blanchard, Chief Economist, IMF:
“So I think the part of the world where deflation or the risk of deflation is most relevant is the Eurozone. There our base line is that there will be no deflation, there will be low inflation, lower than the ECB tries to achieve in general. But there is a risk.”
HYDERABAD, INDIA
7.Various shots, traffic
WASHINGTON DC
8.SOUNDBITE(English) Olivier Blanchard, Chief Economist, IMF:
“On the one hand you have stronger growth in advanced economies means more exports for emerging markets, that’s good, right? But on the other hand normalization of U.S. policy means higher rates at some point, maybe less capital inflows, maybe even capital outflows. So these countries are doing well on the export side but have to face tighter financial conditions.”
MEXICO CITY, MEXICO
9. Wide shot, street with Plaza de la Independencia
10. Med shot, Zocalo
WASHINGTON DC
11.SOUNDBITE(English) Olivier Blanchard, Chief Economist, IMF:
“As the effects of the financial crisis slowly quiet down or disappear inequality is going to be a big issue. And it’s an issue for us because inequality is bad, increasing inequality is bad to a large extent, but also it may have adverse growth effects. At some stage it may actually slow down growth and make it much more difficult to grow, so we have to care about it very much.”
NEW YORK CITY
12. Various shots, Wall Street
In its latest World Economic Outlook, the IMF says the global recovery is becoming broader, but there are new challenges to emerging market and developing economies, The IMF forecasts global growth to average 3.6 percent in 2014―up from 3 percent in 2013―to rise to 3.9 percent in 2015.
The strengthening of the recovery from the Great Recession in the advanced economies is a welcome development, the IMF says. But the latest report emphasizes that growth is not evenly robust across the globe and that and more policy efforts are needed to fully restore confidence, ensure robust growth, and lower downside risks.
Much of the impetus for stronger global growth comes from advanced economies, such as United States, euro area, and Japan, but at varying speeds.
A major impulse to global growth has come from the United States, where annual growth in 2014–15 is projected to be above trend at about 2¾ percent. Fewer tax increases and spending cuts help; support also comes from low interest rates, a recovering real estate sector, and higher household wealth.
“I think the recovery is strongest in the U.S. in the sense that for the most part the brakes are gone. People can borrow at low rates, fiscal consolidation is now fairly slow. So everything is right and interest rates are still very low and will remain as long as they need to be low. So I think the U.S. recovery is the strongest among advanced economies and therefore in a way it’s pulling the world,” said Olivier Blanchard, the IMF’s Chief Economist.
In the euro area, growth has turned positive. Across the euro area, a strong reduction in the pace of tax increases and spending cuts is expected to help lift growth. Outside the core, contributions from net exports have helped the turnaround, as has the stabilization of domestic demand. However, growth in demand is expected to remain sluggish, given continued financial fragmentation, tight credit, and a high corporate debt burden.
“I think the euro core and the UK are in good solid shape with variations, but in general okay. The euro periphery, southern periphery, Spain, Portugal, Italy, still have a tougher time and so there although the growth numbers are positive, which is good news, no time to relax,” Blanchard said.
The report reiterates the emerging risk of very low inflation in advanced economies, especially in the euro area, reflecting depressed activity. Inflation is projected to remain below target for some time. If longer-term inflation expectations drift down in response, risks of lower-than-expected inflation will increase, with adverse effects on economic activity from added real debt burdens and premature real interest rate increases. The lingering danger is the longer inflation remains weak, the more prone the region is to deflation in the event of an unexpected shock.
“So I think the part of the world where deflation or the risk of deflation is most relevant is the Eurozone. There our base line is that there will be no deflation, there will be low inflation, lower than the ECB tries to achieve in general. But there is a risk,” Blanchard said.
Emerging market and developing economies continue to contribute more than two-thirds of global growth, and their growth is projected to increase moderately from 4.7 percent in 2013 to 4.9 percent in 2014 and 5.3 percent in 2015. The main impetus is stronger export growth, lifted by stronger activity in advanced economies. Domestic demand growth is expected to remain lackluster in many economies, given investment weaknesses and the dampening impact on activity of tighter, external funding and domestic financial conditions and, in some economies, of supply-side and other structural constraints.
“On the one hand you have stronger growth in advanced economies means more exports for emerging markets, that’s good, right? But on the other hand normalization of U.S. policy means higher rates at some point, maybe less capital inflows, maybe even capital outflows. So these countries are doing well on the export side but have to face tighter financial conditions,” Blanchard said.
Blanchard also noted that growing income inequality could have a negative effect on growth.
“As the effects of the financial crisis slowly quiet down or disappear inequality is going to be a big issue. And it’s an issue for us because inequality is bad, increasing inequality is bad to a large extent, but also it may have adverse growth effects. At some stage it may actually slow down growth and make it much more difficult to grow, so we have to care about it very much,” Blanchard said.
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