América Latina

The outlook for the OECD economies andeffects on LAC: Issues for panel discussionLuiz de Mello | 2014

A AMÉRICA LATINAE AS NOVAS CONDIÇÕESECONÔMICAS MUNDIAIS

seminário

Luiz de Mello

OECD

FGV, Rio de Janeiro

19 September 2014

Bumpy recovery in the advanced economies

◦ Headwinds from high unemployment and ongoing fiscal consolidation

◦ Activity has already slowed down in LAC (GDP growth < 2.5% in 2014)

Column1 2013 2014 2015

United States 2.2 2.1 3.1

Euro area -0.4 0.8 1.2

Japan 1.6 0.9 1.1

Germany 0.2 1.5 1.5

France 0.4 0.4 1.0

Italy -1.8 -0.3 0.2

United Kingdom 1.8 3.1 2.8

Canada 2.0 2.3 2.7

China 7.7 7.4 7.3

India 4.7 5.7 5.9

Brazil 2.5 0.3 1.4

GDP growth (OECD Interim Outlook) Per cent

Note: GDP at market value adjusted for working days. For

Germany and India, this measure may differ from national

headline measures.

There are signs of a stabilisation of growth rates in the EMEs

◦ Not only PMI but also other leading indicators, like latest OECD CLIs

3

GDP growth and Composite PMI

-6

-4

-2

0

2

4

6

8

10

12

14

40

42

44

46

48

50

52

54

56

58

60

Per cent Index

Emerging Markets PMI (LHS)

BRIICS GDP growth (s.a.a.r.; RHS)

Note: PMI values above 50 indicate expansion.

Source: HSBC; Markit; OECD National Accounts database; and OECD

calculations.

Slow growth in global trade and effect on commodity prices

◦ Global trade has been growing at much below pre-crisis trend since 2012

◦ LAC exports have lost steam, not least due to price effects

-20

-15

-10

-5

0

5

10

15

20

-20

-15

-10

-5

0

5

10

15

20

Pre-crisis average (1990-2007)

Global trade in goods and services Volumes, year-on-year percentage change

Source: OECD National Accounts database.

Normalisation of monetary stance and its effect on appetite for risk and credit to EMEs

Rising current account deficits and more fragile external financing in LAC; stable external indebtedness but rising budget deficits

External credit shocks are good predictors of business cycle in LAC

Short-term policy requirements

◦ Fiscal and monetary policy mix and ability to maintain counter-cyclical stance in the near term?

Longer-term agenda: remove structural impediments to faster growth

◦ Income gaps in LAC relative to OECD best performers are due essentially to lower labour productivity rather than lower utilisation

◦ Measures to enhance productivity growth in LAC?

Thank you!

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