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The World Region

Why the global economy could be turning a significant corner, in six charts

Ayhan Kose's picture

2018 will likely mark a turning point for the global economy. For the first time since 2008, the negative global output gap – defined as the difference between the levels of actual output and output if operating at full capacity – is expected to close. As the output gap closes in advanced economies, central banks are likely to normalize monetary policy after a decade of exceptional easing. With this anticipated withdrawal of stimulus by advanced economies, emerging market and developing economy policymakers need to remain alert to the potential for adverse spillovers.

Output gaps are closing

In 2018, for the first time since 2008, the negative global output gap is expected to be closed.

Global output gap
Source: World Bank staff estimates.
Notes: Output gaps calculated using multivariate filter. Global, regional, and group output gaps are calculated using constant 2010 U.S. dollar GDP as weights. The sample includes 15 advanced economies (Australia, Canada, Denmark, Finland, France, Germany, Italy, Japan, New Zealand, Norway, Spain, Sweden, Switzerland, United Kingdom, and United States) and 23 EMDEs (Argentina, Bolivia, Brazil, Bulgaria, Chile, China, Colombia, Croatia, Hungary, India, Indonesia, Kazakhstan, Malaysia, Mexico, Peru, Poland, Romania, Russia, Serbia, South Africa, Thailand, Turkey, and Vietnam). 2018 GDP is forecast. Dashed lines are 95 percent confidence interval bounds computed from the Kalman smoother state variances. Global lower and upper bounds are obtained as GDP-weighted averages of individual country lower and upper bounds.

What triggered the oil price plunge of 2014-2016 and why it failed to deliver an economic impetus in eight charts

Marc Stocker's picture
Download the January 2018 Global Economic Prospects report.

The 2014-16 collapse in oil prices was driven by a growing supply glut, but failed to deliver the boost to global growth that many had expected. In the event, the benefits of substantially lower oil prices were muted by the low responsiveness of economic activity in key oil-importing emerging markets, the effects on U.S. activity of a sharp contraction in energy investment and an abrupt slowdown in key oil exporters. 

Biggest drop in oil prices in modern history

Between mid-2014 and early 2016, the global economy faced one of the largest oil price declines in modern history. The 70 percent price drop during that period was one of the three biggest declines since World War II, and the longest lasting since the supply-driven collapse of 1986.

Real oil prices
Source: World Bank.
Notes: Real oil prices are calculated as the nominal price deflated by the international manufacturers unit value index, in which 100=2010. World Bank crude oil average. Last observation is November 2017.

Building solid foundations: How to promote potential growth, in six charts

Franziska Ohnsorge's picture

Download the January 2018 Global Economic Prospects report.

Despite an acceleration of global economic activity, potential output growth (the growth that can be sustained at full employment and capacity) has slowed. The slowdown reflected weak investment growth, slowing productivity growth, and demographic trends. These forces will continue, and, unless countered, will depress global potential growth further over the next ten years. 

Global Potential Growth Is Below its Long-term Average. Global potential growth slowed in 2013-17 below its longer-term average, whether globally, among advanced economies (AEs) or among emerging market and developing economies (EMDEs).
Sources: World Bank estimates; Haver Analytics; Penn World Tables; World Development Indicators, World Bank. 
Notes: A.  Based on production function approach, GDP-weighted averages for a sample of 30 advanced economies and 50 EMDEs. 

Why 2018 global growth will be strong, and why there is still cause for concern, in 10 charts

Carlos Arteta's picture
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Download the January 2018 Global Economic Prospects report.

Global growth accelerated to 3 percent in 2017, supported by a broad-based cyclical recovery encompassing more than half of the world’s economies, and is expected to edge up to 3.1 percent in 2018. Global trade regained significant momentum, supported by an upturn in investment.

As headwinds ease for commodity exporters, growth across emerging and developing economies is expected to pick up. However, risks to the outlook remain titled to the downside, such as the possibility of disorderly financial market adjustment or rising geopolitical tensions.

A major concern in the subdued pace of potential growth across emerging market and developing economies, which is expected to further decline in the next decade. Structural reforms will be essential to stem this decline, and counter the negative effects of any future crisis that could materialize.

The broad-based recovery should continue

Global growth accelerated markedly in 2017, supported by a broad-based recovery across advanced economies and emerging market and developing economies (EMDEs), and it is expected to edge up in 2018.
 
Growth

Energy and raw materials prices gained in December, beverages and fertilizer prices fell – Pink Sheet

John Baffes's picture
Energy commodity prices gained 2 percent in December—the sixth consecutive monthly gain—led by a 6 percent increase in coal prices, the World Bank’s Pink Sheet reported.

Agriculture prices declined marginally, as a 5 percent decline in beverages, led by cocoa (down 10 percent) outweighed a 2 percent increase in raw materials prices, led by cotton (up 6 percent) and natural rubber (up 5 percent). Fertilizer prices declined 5 percent, led by a 11 percent drop in urea.

Metals and mineral prices gained less than 1 percent. A large gain in iron ore (up 12 percent) was offset by declines in zinc and nickel. Precious metals prices declined 2 percent, led by a 1 percent decline in gold.

The pink sheet is a monthly report that monitors commodity price movements.
 
Energy and raw material price indexes increased in December while beverage and fertilizer prices declined sharply.

 

How did starting a business become easier than ever?

Frederic Meunier's picture

With more jobs and competitiveness in mind, many economies worldwide have simplified their business start-up rules and regulations over recent years. Since the first Doing Business report was launched 15 years ago in 2003, a total of 626 national reforms that reduced the time and the costs of starting a business were recorded globally.

Migration: The future depends on our actions today

Caglar Ozden's picture

Around 250 million migrants currently live outside their countries of birth, making up approximately 3.5 percent of the world population. Despite the widespread perception of a global migration crisis, this ratio has stayed remarkably stable since the end of the Second World War and lags well behind other major metrics of globalization – international trade, capital flows, tourism etc. A more remarkable statistic is that refugees, at around 15 million, account for 6 percent of the migrant population and only 0.2 percent of world population. In other words, we can fit all refugees in the world in a city with an area of 5000 square kilometers – roughly the size of metropolitan Istanbul or London or Paris – and still have some space left over.

Bouncing back: Resilience as a predictor of food insecurity

Erwin Knippenberg's picture

One in eight people worldwide still go to bed hungry every night, and the increased severity of natural disasters like droughts only exacerbates this situation. Humanitarian agencies and development practitioners are increasingly focused on helping the most vulnerable recover from the effect of these shocks by boosting their resilience. 

Are public credit guarantees worth the hype?

Sergio Schmukler's picture

Public credit guarantees have become a popular instrument to expand lending to small and medium enterprises (SMEs). More than 30 percent of credit guarantee schemes around the world have some form of state ownership. Public credit guarantee schemes are particularly important in developing countries, where they are the main type of guarantee scheme.

Global poverty today, the 1908 winter in St. Petersburg, and ‘controversy bias’

Francisco Ferreira's picture

Robert Allen’s recent AER paper on “Absolute Poverty: When Necessity Displaces Desire” is a fascinating read, on many levels. The paper uses linear programming (LP) to compute (four variants of) least-cost diets for twenty countries, using prices from the International Comparisons Project (ICP) microdata. To the resulting least-cost food budgets, estimates of non-food costs covering housing, fuel, lighting, clothing and soap are added, generating “basic need poverty lines” (BNPL) for each country.

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