Every six months the OECD publishes its Economic Outlook. This gives annual (and some quarterly) macroeconomic data for each of the 30 OECD countries, for all 30 countries together and for the eurozone. There are 63 tables covering most of the major macroeconomic indicators, most going back 13 years with forecasts for the next two years. OECD Economic Outlook is normally published in June and December.
Similarly, every six months the European Commission’s Economic and Financial Affairs Directorate publishes its European Economy Statistical Annex. This gives annual data for 76 macroeconomic variables for each of the EU countries, plus the USA and Japan. Most of the tables go back to 1970 and forecast ahead for two years. There is also a separate publication, Economic Forecasts. The statistical appendix to this publication has 62 tables, again covering a range of macroeconomic data. The tables go back to 1992 and again forecast ahead for two years. There is a lot of useful commentary about the individual economies of the EU and other major economies, such as the USA, Japan, China and Russia. Both publications normally appear in May and November.
Another organisation to publish 6-monthly forecasts is the International Monetary Fund. The Statistical Appendix of the Word Economic Outlook (after clicking on this, go to link on right), normally published in April and October, gives macroeconomic data for most economies and regions of the world. Forecasts are made ahead for two years and for five years.
The state of the world economy was so severe in early 2009 and was deteriorating so rapidly that earlier forecasts proved far too optimistic. In early 2009, all three organisations published interim forecasts – the European Commission and the IMF in January and the OECD at the end of March. They painted a much bleaker picture than the forecasts published at the end of 2008. What will the next set of forecasts look like? Will they be even bleaker?
The following links take you to these interim forecasts and to articles commenting on them.
EU interim forecasts for 2009–2010: sharp downturn in growth European Commission, Directorate-General for Economic and Financial Affairs (19/1/09)
World Economic Outlook Update IMF (28/1/09)
OECD Interim Economic Outlook, March 2009 OECD (31/3/09)
Global economy set for worst fall since WWII Times Online (31/3/09)
UK economy: We still need to take our medicine Times Online (1/4/09)
OECD predicts 4.3% contraction in richest economies this year Irish Times (1/4/09)
Global Slump Seen Deepening The Wall Street Journal (1/4/09)
Glimmers of hope, forecasts of gloom The Economist (2/4/09)
Questions
- Compare the forecasts for GDP growth, unemployment, inflation and output gaps for some of the major economies made by the OECD at the end of March with those made by the European Commission and the IMF in January and with those made by all three organisations in the autumn of 2008. Why, do you think, are there such large divergences in the forecasts?
- For what reasons might the OECD March forecasts turn out to be (a) much too pessimistic; (b) much too optimistic?
- In the light of the forecasts, should countries adopt further strongly expansionary fiscal policies – something rejected at the G20 summit in Early April (see news item Saving the world)?
The G20 countries meet each year. Normally their meetings are full of fine words resulting in little action. But at a summit in London on 2 April 2009, the fear of a deepening global recession focused minds and a package of measures worth over $1 trillion was agreed to stimulate trade and growth. This included $750 billion for the IMF to help economies in severe difficulties, $250 billion for financing world trade and $100 to multilateral development banks (such as the Asian Development Bank) to provide extra aid to the poorest countries.
The extra money for the IMF would include $500 billion of loans from member countries and £250 billion in new money – a form of international quantitative easing. This new money would be in the form of ‘special drawing rights’. These are denominated in dollars and are created by the IMF to be drawn on by countries in difficulties.
There was also agreement to tighten financial regulation and to resist protectionism. A ‘Financial Stability Board’ would be set up and work with the IMF to design a strengthened regulatory system for banks and other financial institutions and for financial markets and instruments.
The following articles look at the agreement and its likely effects.
‘This is the day the world came together to fight back’ Independent (2/4/09)
G20 communiqué: Point by point analysis Telegraph (2/4/09)
G20 summit – leaders’ statement. Full text of the communiqué Guardian (2/4/09)
G20: Economic summit snapshot BBC News Online (2/4/09)
G20 leaders seal $1tn global deal BBC News Online (2/4/09)
G-force The Economist (2/4/09)
World leaders declare war on risk Sydney Morning Herald (3/4/09)
Postscript (Sept 2009)
G20: What progress has been made? BBC News (23/9/09)
G20: Pledge by pledge BBC News (25/9/09)
Questions
- What will determine the success or failure of the G20 agreement to revive the world economy?
- Identify any multiplier effects from the agreed measures.
- Why did the French and German governments object to any further fiscal stimulus packages?
According to the Nationwide building society, house prices rose in March for the first time in 16 months. Does this mean that the decline in UK house prices is over? Or is this just a ‘blip’ in a continuing downward movement? The following articles look at the causal factors influencing house prices.
UK house prices rise first time in 16 months Times Online (2/4/09)
House prices show slight increase in March Guardian (2/4/09)
Surprise bounce to March house prices Nationwide press release (2/4/09)
Questions
- Identify the factors on the demand and supply side that have caused the fall in house prices since mid 2007.
- What have been the main reasons why house prices rose in March 2009?.
- How likely is it that house prices will now continue to rise?
- What role does speculation play in the movement of house prices? What role is speculation likely to play in the next few months?
The November 2008 trade statistics have just been released and they show that the UK had the largest nominal trade deficit on record at £8.3 billion (up from 7.6 billion in October). This represents nearly 7 per cent of GDP, the highest since 1974.
Trade gap widens despite pound’s slump Independent (14/1/09)
UK trade deficit hits a record as weak pound fails to help Telegraph (13/1/09)
Britain’s trade deficit widens to new record Guardian (13/1/09)
UK Trade, November 2008 National Statistics (13/1/09)
Questions
- Why has the UK’s trade gap widened?
- How can the concepts of income and price elasticity of demand be used in analysing the causes of the widening deficit?
- Explain how these elasticity values are likely to differ in the short and long run.
- Explain the factors that will determine whether the trade gap will widen or narrow over the coming months.