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International Economic Outlook
International Monetary FundSeptember 29, 2016
Alejandro WernerDirector
Western Hemisphere Department
1
Global and Regional Developments
Relevant Issues
2
Global and Regional Developments
Relevant Issues
3
WorldAdvanced
Economies U.S. Japan Euro Area
Emerging Market and Developing Economies China India Brazil Russia
2003–07 5.1 2.8 2.9 1.8 2.2 7.8 11.7 8.8 4.0 7.5
2010 5.4 3.1 2.5 4.7 2.1 7.4 10.6 10.3 7.5 4.5
2015 3.1 1.9 2.4 0.5 1.7 4.0 6.9 7.6 -3.8 -3.7
2016 3.1 1.8 2.2 0.3 1.6 4.1 6.6 7.4 -3.3 -1.2
2017 3.4 1.8 2.5 0.1 1.4 4.6 6.2 7.4 0.5 1.0
Source: IMF, World Economic Outlook (July 2016 Update) database. 4
5
-15
-10
-5
0
5
10
15
20
-15
-10
-5
0
5
10
15
20
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Real investment Real imports
World: Real Investment and Real Imports(Percent change)
Sources: IMF, World Economic Outlook database; and IMF staff calculations.
Contribution to Real GDP Growth(Percent change from previous quarter; SAAR)
Source: U.S. Bureau of Economic Analysis. Sources: Bloomberg, L.P.; Federal Reserve; and IMF staff estimates.
4.5
5.5
6.5
7.5
8.5
0
100
200
300
400
2013 2014 2015 2016
Unemployment rate(percent; right scale) Change in
nonfarmpayrolls
(thousands)
Average, 2004–06
Payrolls and Unemployment Rate
6
Inflation and Expectations(Year-over-year percent change)
Sources: Bloomberg L.P.; HCBO; FOMC; Haver Analytics; U.S. Bureau of Economic Analysis; and IMF staff calculations.Note: dotted lines represent projections.
-2
0
2
4
6
2014Q2 2014Q4 2015Q2 2015Q4 2016Q2
Net exports Govt. consump. and invest.Change in private inventories Non-residential investmentResidential investment Personal consumption exp.
Real GDP growth
0
1
2
3
0
1
2
3
Core PCE (percent, yoy)
Market implied inflation expectations(TIPS 5 year breakeven rate)
CBO projection
FOMC projection
Real GDP Growth(Percent change)
Inflation(End of period; percent change)
Source: IMF, World Economic Outlook (July 2016 Update) database.Note: Includes Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovak Republic, Slovenia, Spain.
7
1.6
-15
-10
-5
0
5
10
0.5
-4
-2
0
2
4
6
8
10
12
Price stability objective
Source: IMF, World Economic Outlook (July 2016 Update) database.Note: Includes Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovak Republic, Slovenia, Spain.
Stock Market(Index: July 1, 2015 = 100)
50
60
70
80
90
100
110
EurostoxxEurostoxx banksS&P 500
Sources: Bloomberg, L.P.; and IMF staff calculations.
8Source: IMF, World Economic Outlook (July 2016 Update) database.
Real GDP, Consumption, and Investment Growth
(Percent change)
Real GDP Growth, Imports, and Industrial Production
(Percent change)
Sources: Haver Analytics; and IMF, World Economic Outlook (July 2016) database.Note: for 2016 the data correspond to the second quarter.
100
120
140
160
180
200
220
2006
Q4
2007
Q4
2008
Q4
2009
Q4
2010
Q4
2011
Q4
2012
Q4
2013
Q4
2014
Q4
2015
Q4
Total Social Financing(Adjusted; Percent of GDP)
Sources: CEIC Data Company Ltd., and IMF staff calculations.
0
2
4
6
8
10
12
14
16
40
42
44
46
48
50
52
54
2007 2009 2011 2013 2015
Real GDP (right scale)Real consumptionReal investment
0
5
10
15
20
25
30
2000
2002
2004
2006
2008
2010
2012
2014
2016
Real GDPReal importsIndustrial production
9
Global Commodity Prices(Index: 2005 = 100)
Source: IMF, World Economic Outlook database.
40
80
120
160
200
240
280
40
80
120
160
200
240
280
2009
:Q1
09:Q
3
10:Q
1
10:Q
3
11:Q
1
11:Q
3
12:Q
1
12:Q
3
13:Q
1
13:Q
3
14:Q
1
14:Q
3
15:Q
1
15:Q
3
16:Q
1
16:Q
3
17:Q
1
17:Q
3
Energy Agricultural raw materials Metals
10
Equity and Bond Flows(Cumulative flows in billions of U.S. dollars)
Sources: EPFR database; and IMF staff calculations.Note: Includes Argentina, Brazil, Chile, Colombia, Mexico, Peru, and Venezuela.
-20
-15
-10
-5
0
5
10
15
2014 2015 2016
Sovereign Spreads(Basis points)
0
200
400
600
800
1000
1200
1400
1600
80
180
280
380
480
580 Brazil ChileColombia MexicoPeru Argentina (rhs)
Sources: Bloomberg, L.P.; national authorities; and IMF staff calculations.
0
10
20
30
40
50
60
70
80
90Brazil ChileColombia MexicoPeru
LA5 Foreign Bond Issuance: NonfinancialCorporates
(Billions of U.S. Dollars, 12-month rolling sum)
Sources: Dealogic and IMF staff calculations.¹Data for Brazil include issuance by foreign subsidiaries of Brazilian firms.
11
LAC: Real GDP Growth(Percent)
Source: IMF, World Economic Outlook (July 2016 Update) database.Note: Purchasing-power-parity GDP-weighted averages.
Projections
2010 2014 2015 2016 2017
LAC 6.1 1.3 0.0 -0.4 1.6South America 6.6 0.7 -1.3 -1.9 1.0
Excluding ARG, BRA, ECU, VEN 5.9 3.3 2.9 2.5 3.0
CAPDR 4.9 4.8 4.9 4.4 4.2
Caribbean
Tourism-dependent -1.0 0.8 0.6 1.6 1.9
Commodity exporters 3.7 0.0 -0.9 -0.6 2.1
Memorandum items:
LA6 6.4 1.4 -0.4 -0.1 1.8
Brazil 7.5 0.1 -3.8 -3.3 0.5
Mexico 5.1 2.2 2.5 2.5 2.6
2016 LAC growth: -0.4%
Source: IMF, World Economic Outlook (July 2016 Update) database.Note: Historical average refers to the average growth from 2000–13.
12
U.S. and Euro Area Potential Output Growth (2000-21)(Percent change)
Source: IMF, World Economic Outlook (July 2016 Update) database.Note: dotted lines represent projections.
0
0.5
1
1.5
2
2.5
3
3.5
4
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
United StatesEuro area
0.0
0.3
0.6
0.9
1.2
1.5
0.0
0.3
0.6
0.9
1.2
1.5
1980s 1990s 2000s 2010-2015¹ 2021
U.S. Average Total Factor Productivity Growth (Percent)
Sources: Federal Reserve Bank San Francisco; Haver Analytics; and IMF staff calculations.¹For multi-factor, 2011-2015. 2010 is included in 2000s.
Projection
13
0
1
2
3
4
5
6
0
1
2
3
4
5
6
2010 2012 2014 2016
10-year yield in 10 years time
10-year yield
Major Advanced Economies 10-year Yield(Percent; GDP-weighted)
Source: Bloomberg L.P.
The U.S.: Real Neutral Rate: Declining Trend(Percent)
Lower global neutral rates
Lower medium-term growth in LA
Uncertainty surrounding output gaps
Source: IMF Working Paper 15/135, Lower for Longer: Neutral Rates in the United States.Note: FOMC median LT rate is as of July 2016.
-3
-2
-1
0
1
2
3
4
5
6
9/1/
1983
8/1/
1985
7/1/
1987
6/1/
1989
5/1/
1991
4/1/
1993
3/1/
1995
2/1/
1997
1/1/
1999
12/1
/200
0
11/1
/200
2
10/1
/200
4
9/1/
2006
8/1/
2008
7/1/
2010
6/1/
2012
5/1/
2014
4/1/
2016
3/1/
2018
2/1/
2020
FOMC median LT rate
14
15
-1
0
1
2
3
4
5
-1
0
1
2
3
4
5Latin America and the CaribbeanBrazil
LAC and Brazil Potential Output Growth (2015-21)(Percent change)
Source: IMF, World Economic Outlook (July 2016 Update) database.Note: dotted lines represent projections.
Global and Regional Developments
Relevant Issues
16
0
2
4
6
8
10
12
14
16
<4 4-6 7-10 >10
Num
ber o
f cou
ntrie
s
Years until reaching single digit inflation
BoliviaGuatemalaHungaryIceland
New ZealandPoland
Tajikistan
ArmeniaAzerbaijan
BrazilGeorgia
Kazakhstan
ChileColombiaCosta Rica
EgyptGhanaGreeceIsrael
MoldovaParaguay
RussiaSouth Africa
TanzaniaUzbekistan
ArmeniaBelarusBulgaria
Dom. Rep.Kyrgyz Rep.
PeruMexico
TurkmenistanUkraineUruguay
Moderate Inflation Episodes and Convergence to Low Inflation
Source: Fund staff estimates.
17
Inflation and Real Effective Exchange Rate in Chile and Colombia, 1985-2016
Sources: IMF, World Economic Outlook database and staff calculations.Note: Lighter bars represent inflation less than 10 percent.
18
24%
29%
21%
9%8%
60
70
80
90
100
110
120
130
0
5
10
15
20
25
30
35Inflation REER (r.h.s)
Central Bank independence
Colombia(Inflation: y/y percent change; REER: 2010=100, + appreciation)
31%
26%
13%
8%
4% 4%
70
75
80
85
90
95
100
105
110
115
0
5
10
15
20
25
30
35
Inflation REER (r.h.s)Central Bank independence
Chile(Inflation: y/y percent change; REER: 2010=100, + appreciation)
Inflation and Real Effective Exchange Rate in Mexico and Brazil, 1985-2016
Sources: IMF, World Economic Outlook database and staff calculations.Note: Lighter bars represent inflation less than 10 percent.
19
Max. inflation 2,477%22%
9.6%
13%11%
40
50
60
70
80
90
100
110
0
5
10
15
20
25
30Inflation REER (r.h.s)
Brazil(Inflation: y/y percent change; REER: 2010=100, + appreciation)
30%
19%
52%
12%
9% 7%3%
60
70
80
90
100
110
120
130
0
10
20
30
40
50
60Inflation REER (r.h.s)
Central Bank independence
Mexico(Inflation: y/y percent change; REER: 2010=100, + appreciation)
20
Primary expenditure Average 2001–07 Average 2008–15
Primary Government Expenditure(Percent of GDP)
Sources: IMF, World Economic Outlook (July 2016 Update) database; and IMF staff calculations.
Argentina Brazil Chile Colombia
MexicoEcuador Peru Uruguay
15
20
25
30
35
40
45
2001 2005 2009 2013 201728
29
30
31
32
33
34
2001 2005 2009 2013 20171517192123252729
2001 2005 2009 2013 201720
22
24
26
28
2001 2005 2009 2013 2017
15
17
19
21
23
25
27
2001 2005 2009 2013 201715
20
25
30
35
40
45
2001 2005 2009 2013 20171516171819202122
2001 2005 2009 2013 201722
24
26
28
30
2001 2005 2009 2013 2017
ARG
BRA
CHL
COL
PER
MEXURY
0
50
100
150
200
-15 -10 -5 0 5 10
Gro
ss D
ebt
Primary Balance
Emerging economiesAdvanced EconomiesLAC countries
General Government: Primary Balance and Gross Debt, End of 2015(Percent of GDP)
Source: IMF, World Economic Outlook database.
21
22
Debt-Stabilizing Primary Balance(Percent of GDP)
Sources: IMF, World Economic Outlook (July 2016 Update) database; and IMF staff estimates.Note: Number next to the red line refers to the 2021 debt-to-GDP ratio.
ARG
ARGBRABRA
BRA
BRAECU
0
5
10
15
20
25
30
35
40
45
Total Transfers Wages Pensions Interest G&S Capital
LATAM averageArgentinaVenezuelaBrazilEcuador
4%5%
5%
12%
General Government Expenditure(Percent of GDP, 2015)
Source: IMF staff estimates.
95.4%
25.6%
41.9%52.0%
24.1%
-3
-2
-1
0
1
2
3
4
5
2015
2016
2017
2018
2019
2020
2021
2015
2016
2017
2018
2019
2020
2021
2015
2016
2017
2018
2019
2020
2021
2015
2016
2017
2018
2019
2020
2021
2015
2016
2017
2018
2019
2020
2021
Brazil Chile Colombia Mexico Peru
Primary balanceDebt-stabilizing primary balance
Chile
Colombia
Mexico
Peru
Uruguay
Argentina
0
20
40
60
80
100
0 5 10Teacher-student ratio, per 100 students
EMs OECD
n
Net
sec
onda
ry s
choo
l enr
ollm
ent (
in p
erce
nt)
Secondary School Teachers and Outcomes¹(Latest Available Value)
Sources: World Bank and IMF staff estimates.¹Dashed line is LA6 average.
Brazil
ChileColombia
Mexico
Peru
Uruguay
Argentina
30
35
40
45
50
55
60
65
70
75
80
0 1000 2000 3000
Hea
lth A
djus
ted
Life
Exp
ecta
ncy,
2013
Health expenditure per capita, PPP$
EMs OECD
Health Spending Efficiency Frontier¹(Latest Available Value)
Sources: World Bank and IMF staff estimates.¹Dashed line is LA6 average.
23
Composition- revenues and expenditures (expenditure measures tend to have higher multipliers than revenue multipliers in the short-term)
Rebalancing the composition of spending and of revenue (e.g. shifting in the revenue composition toward more growth-friendly taxes: property taxes>indirect taxes>labor income>corporate income taxes)
Base broadening measures (e.g. rationalizing tax exemptions and preferential regimes)
Improvements in revenue administration
Prioritizing and better targeting spending
Improving efficiency
Ensuring sound pension and health systems
Building strong fiscal institutions
Source: Fiscal Policy and Long-term Growth (IMF, 2015).
24
General Principles:
Rationalizing social assistance programs and improving targeting; Introducing and expanding conditional cash transfer programs as administrative capacity improves; Expanding noncontributory means-tested social pensions, while ensuring long-term sustainability; Improving access of low-income families to education and health services; Expanding coverage of the personal income tax (and making it progressive)
During Normalization:
Strengthening social safety nets to protect vulnerable households during normalization Cutting less progressive spending, such as generalized subsidies and government wages, improving targeting
of social spending, and improving the incidence of in-kind spending such has education and health Enhancing the efficiency and equity of the tax system through greater reliance on progressive taxation
Source: fiscal policy and income inequality (IMF, 2014)
25
Investment and Consumption(Percent of GDP; constant prices)
Sources: IMF, World Economic Outlook database; and IMF staff calculations.
7
9
11
13
15
17
19
21
23
66
70
74
78
82
86
90
1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015
Final consumption expenditureGross fixed capital formation (right scale)
26
Consumption (2015)(Percent of GDP)
Source: IMF, World Economic Outlook (July 2016 Update) database.
27
70
72
74
76
78
80
82
84
86
0
5
10
15
20
25
30
Investment (2015)(Percent of GDP)
Source: IMF, World Economic Outlook (July 2016 Update) database.
Investment Surge Episodes(Median Size and Duration)
0
1
2
3
4
5
6
Duration SizeYears Percent of GDP
Source: IMF staff calculations.
Investment-to-GDP Ratio During Investment Surge Episodes (Percent of GDP)
Source: IMF staff calculations.
15
17
19
21
23
25
27
29
-2 -1 0 1 2 3 4 5
Median across episodesAustraliaInterquartile range of episodes
Years
28
International Economic Outlook
International Monetary FundSeptember 29, 2016
Alejandro WernerDirector
Western Hemisphere Department
29
