IMF World Economic Outlook

IMF Eco­nom­ic Coun­sel­lor, Ken Rogoff, is highly”>”>highly quote­able. h3. On Europe’s growth outlook

” As for Europe, the most con­crete pos­i­tive recent news seems to be the good news else­where. Ger­many, Italy, and the Nether­lands have all been in reces­sion in the first half of the year, and French GNP declined in the sec­ond quar­ter, as did GDP for the euro area as a whole. Weak con­sumer con­fi­dence and frag­ile cor­po­rate bal­ance sheets are lead­ing prob­lems. *For the moment, most Euro­peans who want to see an eco­nom­ic recov­ery will have to watch it on TV*. ”

h3. Putting Can­cún in per­spec­tive bq. “I see the steady expan­sion that we’ve had in glob­al trade over the entire post-World War II peri­od as … a major fac­tor in rais­ing world incomes and reduc­ing world pover­ty. It is of con­sid­er­able con­cern that trade has been slow­ing over the last decade. There are many fac­tors under­ly­ing this. Cycli­cal fac­tors are part of it, but it was also slow­ing even dur­ing the tail end of the boom. bq. …The pull­back of the glob­al peace div­i­dend of the ’90s due to more geopo­lit­i­cal uncer­tain­ties in this decade than we had in the last … has unques­tion­ably held back glob­al growth and I think will unques­tion­ably hold back trend income growth to some extent over the com­ing decades. We need some­thing to coun­ter­bal­ance that. That rein­forces the need for con­tin­ued progress on trade. It’s very hard to come up with num­bers quan­ti­fy­ing exact­ly how impor­tant it is. But it is of con­sid­er­able con­cern to look at how the num­bers on trade have come down. ”

h3. On cur­rent account imbal­ances bq.  “We view the cur­rent account imbal­ances as … a very seri­ous prob­lem over­hang­ing the glob­al econ­o­my. It is prob­a­bly get­ting worse with the unbal­anced recov­ery. Some day, the U.S. cur­rent account deficit–which now runs over 5 per­cent of GDP … has to unwind and, when it does, there will be a sharp drop in the dol­lar. bq. Now, when the dol­lar falls, the ques­tion is, where is the bur­den of adjust­ment going to be?… Clear­ly, if the euro has to bear the lion’s share of the adjust­ment in the dol­lar that is going to cre­ate a lot more dif­fi­cul­ties than if it is more even­ly dis­trib­uted, than if the Asian currencies–not just Chi­na but all the Asian currencies–also appre­ci­ate, allow­ing them­selves to appre­ci­ate sig­nif­i­cant­ly against the dol­lar. bq. I guess I would sum it up by say­ing it is bad enough that the glob­al econ­o­my has been fly­ing on one engine. But it is going to be a lot worse if it has to land on one wheel.”

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