Global Economic Prospects Summer 2010

Global Economic Prospects
Summer 2010


Key messages
The global recovery is moving into a more mature phase led by growing domestic demand.

However, conditions in Europe may derail the recovery.
A more rapid adjustment of fiscal policy would be better for developing countries.
A decline in aid flows could have serious consequences for the poorest countries.
More...
Global outlook summary table
A table summarizing the forecast. More detailed information is available here.

Debt crisis
So far, the uncertainty about the sustainability of fiscal positions in several high-income European countries (EU-5) has had limited impacts on developing countries. While stock markets have declined, spreads and credit default swaps for most countries have remained stable. So far industrial production and trade continue to expand rapidly. More...

Financial markets
Financial markets have recovered from their lows in 2009, but conditions remain tight and banks may be exposed to debt in EU-5 countries. Bond issuance declined sharply in May. International capital flows to developing countries are projected to reach about 3.5 percent of their GDP in 2012, up from 2.5 percent in 2009. See also the topical annex on Financial market developments. More...

Medium-term prospects
Growth prospects are very uncertain because of the situation in Europe. Nevertheless, developing countries are projected to lead the recovery with growth rates around 6 percent. High-income countries growth will accelerate from about 2-2.3 percent in 2010 to between 2.3 and 2,7 percent in 2012.
Regional annexes touch on prospects in:
These should all be links.

East Asia & the Pacific
Europe & Central Asia
Latin America & the Caribbean
Middle-East & North Africa
South Asia
Sub-Saharan Africa
More...

Risks and policy impacts
Should the crisis in Europe worsen, global growth could be, lower by between as much as 0.7 percentage points and in the case of a crisis, a double-dip recession in high-income countries may not be avoided. An aggressive fiscal consolidation response would prove to be win-win for both high-income and developing countries. Long-term growth and poverty reduction in low-income countries could be affected if bilateral aid flows fall as they have during previous recessions. More...

Concluding remarks
Policy in high-income countries should focus on reducing the uncertainty surrounding the Greek debt issue. Growth in developing (and high-income) countries would benefit from a more rapid consolidation. Poverty reduction in low-income countries could be impeded if aid flows are cut and countries are forced to cut back on infrastructure and human capital investment. More...

Prospects for commodity markets

Prospects for inflation

Prospects for financial markets

Regional outlooks
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