IMF World Economic Outlook

IMF Economic Counsellor, Ken Rogoff, is highly”>http://www.imf.org/external/np/tr/2003/tr030918.htm”>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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