In the past three months, the
global recovery has shown
signs of further weakness.
Financial market and sovereign
stress in the euro area
periphery have escalated, close to
end-2011 levels. Growth in a
number of major emerging market
economies has been lower
than forecast. Partly because of a
somewhat better-than-expected
first quarter, the revised baseline
projections in the WEO Update
suggest that these developments
will result in a minor setback to the
global outlook, with global growth
placed at 3.5 per cent in 2012 and
3.9 per cent in 2013, some 0.1 and
0.2 percentage points lower,
respectively, than forecast in the
April 2012 WEO.
The baseline projections incorporate
weaker growth through
much of the second half of 2012 in
both advanced and key emerging
market economies, reflecting the
setbacks to the global recovery
noticed earlier. By the way, nearterm
forecasts are based on certain
usual assumptions. Growth in
advanced economies is projected
to expand by 1.4 per cent in 2012
and 1.9 per cent in 2013, a downward
revision of 0.2 percentage
point for 2013 relative to the April
2012 WEO. Growth in emerging
and developing economies will
moderate to 5.6 per cent in 2012
before picking up to 5.9 per cent in
2013, a downward revision of 0.1
and 0.2 percentage point in 2012
and 2013, respectively, relative to
the April 2012 WEO.
Better Q1, worse Q2
Global growth increased to 3.6
percent (seasonally adjusted
annual rate) in the first quarter of
2012, surprising on the upside by
some ¼ percentage point compared
with the forecasts presented
in the April 2012 World Economic
Outlook, which was partly due to
temporary factors, among them
easing financial conditions and
recovering confidence in
response to the European Central
Bank's (ECBs) longer-term refinancing
operations (LTROs).
Untitled Document
WEO UPDATE PROJECTIONS
FOR GDP GROWTH (%) |
|
Projection |
| |
2011 |
2012 |
2013 |
| Advanced Economies |
1.6 |
1.4 |
1.9 |
Emerging and Developing
Economies |
6.2 |
5.6 |
5.9 |
| Of which |
| China |
9.2 |
8 |
8.5 |
| India |
7.1 |
6.1 |
6.5 |
| Brazil |
2.7 |
2.5 |
4.6 |
| Russia |
4.3 |
4 |
3.9 |
| South Africa |
3.1 |
2.6 |
3.3 |
| World |
3.9 |
3.5 |
3.9 |
However, in post-Q1 period,
downside risks have loomed
large, importantly reflecting risks
of delayed or insufficient policy
action.
Incoming data for the United
States suggest less robust growth
than forecast in April. Growth
momentum has also slowed in
various emerging market
economies, notably Brazil, China,
and India. This partly reflects a
weaker external environment,
decelerated supply due to
capacity constraints and policy
tightening over the past year, as
also increase in investor risk aversion
and perceived growth uncertainty.
Recent, renewed deterioration
of sovereign debt markets in EU
underscores that ensuring
progress in banking and fiscal
union must be a priority. In the
United States, avoiding the fiscal
cliff, promptly raising the debt
ceiling, and developing a medium-
term fiscal plan are of the
essence. In emerging market
economies, policymakers should
be ready to cope with trade
declines and the high volatility of
capital flows
The euro area periphery has
been at the epicenter of a further
escalation in financial market
stress, triggered by increased
political and financial uncertainty
in Greece, banking sector problems
in Spain, and doubts about
governments' ability to deliver on
fiscal adjustment and reform as
well as about the extent of partner
countries' willingness to help.
Commodity prices have fallen.
Among major commodities, crude
oil price declined the most in the
second quarter—at about $86 a
barrel, they are some 25 per cent
below their mid-March highs—
given the combined effects of
weaker global demand prospects,
easing concerns about Iran-related
geopolitical oil supply risks,
and continued above-quota production
by OPEC members.
Global consumer price inflation
is projected to ease as demand
softens and commodity prices
recede. Overall, headline inflation
is expected to slip from 4½
percent in the last quarter of 2011 to 3-3½ per cent in 2012-13.