The International Monetary Fund’s World Economic Outlook is an intimidating beast – the most comprehensive and well-respected survey of the global economy.
So rather than go through the entire thing, which you’re welcome to do at your leisure, I’ve selected some of the more significant and intriguing charts. They tell you more than any chunk of text could about the prospects for the world economy, the risks we’re facing, the strains facing the euro area and the outlook for the UK.
Before we start, though, a few highlights:
– World growth forecast raised from 3.3% this year to 3.5%. Raised next year from 4% to 4.1%.
– Euro area growth forecast also increased (from -0.5% to -0.3%), but Spain downgraded from -1.6% to -1.8% this year.
– UK growth upgraded in 2012 from 0.6% to 0.8%.
Here is a pretty good chart showing which regions have done worst and best out of these most recent revisions. The comparison is with the September 2011 forecast (the last big World Economic Outlook) whereas the ones I’ve mentione above are compared with the WEO update in January. As you can see, the only region with better prospective growth than was forecast back in September is the US and Canada.
The euro area is, of course, the stand out here: a 55% chance of a recession in 2012. The US probability, by comparison, is a mere 10%.
Impact of further euro crisis
Perhaps understandably the euro area itself would be hardest-hit, but it’s worth pointing out just how badly the rest of the world would do. Perhaps to be expected, given the size and significance of the euro area for overall global performance.
Britain not worst-hit by euro crisis
This map shows you which countries would be most badly affected by an intensification of the euro crisis (not, it should be pointed out, the euro break-up the report also contemplates). What’s perhaps most striking is that there are plenty of other countries (even non-EU members) who would be worse-hit by further euro economic misery than Britain. Apologies if the pic is overly small – blog constraints I’m afraid.
Imbalances – not going anywhere
One of the major issues facing the world economy in pre-crisis years (indeed this was the cause of much of the crisis) was that certain economies (eg the US, UK etc) were too reliant on consuming and borrowing from overseas, while others (eg Germany, China, Japan) did the opposite. As you can see from this chart, while the crisis has made the size of those imbalances smaller, they haven’t exactly gone away. The same people are borrowing, the same people saving. The world hasn’t set itself right yet.
Emerging world debt vs developed world
This striking chart shows you that over the coming years while the rich world will get ever more indebted, the younger, emerging economies are actually going to do precisely the opposite. If you were looking for one chart evidencing the shift in economic power in the 21st century, this would do the job pretty well.
UK still over-indebted
While Britain’s economic forecast was upgraded in the WEO, this chart shows you that the UK still has a big problem: its households are still over-extended. Even after the crisis and the house price slump, UK households still have a debt-to-income ratio far higher than any other region of the world.
Euro QE is the biggest in the world
Here is proof that the European Central Bank has, quietly and relatively stealthily, carried out the biggest quantitative easing operation in history. Following its Long Term Refinancing Operation, which involved lending euro banks €1 trillion, it now has an even bigger balance sheet than the Bank of Japan. I’m not entirely sure that the Bank of England doesn’t compete on this front – but it’s not included on this particular chart.