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The Global Economy: Demand, Supply and Interdependence Jason Furman Chairman, Council of Economic Advisers Globes Israel Business Conference December 7, 2014 Advanced Economies Vary Enormously by Recovery From the Crisis and by Current Growth Rates GDP per Working Age Population, Recent Growth vs. Recovery Percent 8 Real Growth, 2013:Q2‐2014:Q2 Ireland Advanced Economies 6 United Kingdom 4 Spain United States Portugal 2 Greece 0 Italy Canada Germany Japan France Israel ‐2 ‐25 ‐15 ‐5 5 15 Cumulative Real Growth Since Pre‐Crisis Peak 25 Note: Working‐age population is defined as those persons 16 to 64 years of age in the United States, and 15 to 64 elsewhere. In countries where population is estimated on an annual basis, quarterly interpolations are used. Data as of 2014:Q3 for the United States, 2014:Q2 for all others. Where recent data on working‐age population is unavailable, the working‐age share of the total population is assumed to remain constant from 2013. Horizontal axis is positioned at the median recent growth rate. Source: Eurostat; World Bank; national sources; CEA calculations. 1 Most Emerging Markets Have Surpassed Their Pre‐Crisis Output Peaks, but Current Growth Rates Vary Widely GDP per Working Age Population, Recent Growth vs. Recovery Percent 8 China Real Growth, 2013:Q2 to 2014:Q2 6 Hungary 4 Mexico Indonesia India 2 Russia South Africa Argentina Brazil 0 ‐2 Emerging Economies ‐4 Ukraine ‐6 ‐10 0 10 20 30 40 Cumulative Real Growth Since Pre‐Crisis Peak 50 60 Note: Working‐age population is defined as those persons 15 to 64 years of age. In countries where population is estimated on an annual basis, quarterly interpolations are used. Data as of 2014:Q2. Where recent data on working‐age population is unavailable, the working‐age share of the total population is assumed to remain constant from 2013. Horizontal axis is positioned at the median recent growth rate. Source: World Bank; national sources; CEA calculations. 2 The Euro Area Risks Losing Nearly a Decade of Output Growth Euro Area Real GDP per Working Age Population Index (2008:Q1=100) 105 100 Forecast (IMF for GDP, OECD for Population) 95 Real Euro Area GDP per Working‐Age Population 90 2008 2010 2012 2014 2016 Note: Working‐age population includes all person 15 to 64 years of age. The projection is calculated by CEA using growth projections from IMF and population projections from OECD. Source: Eurostat; IMF; OECD. 3 Downward Revisions to Growth Projections Have Been Especially Large in the BRIC Economies Five‐Year‐Ahead Growth Forecasts in Selected Economies Percent 12 Emergi ng Ma rkets Forecasted in April 2010 10 Forecasted in October 2014 9.5 8.1 8 6.3 6 6.7 5.0 Adva nced Economies 3.7 4 4.1 3.2 3.1 2.4 2.6 1.7 2 2.0 1.7 1.6 1.0 0 U.S. Japan Euro Area Israel Note: Five‐year‐ahead forecast is for year‐over‐year growth in 2015 (blue bars) and 2019 (red bars). Source: International Monetary Fund, World Economic Outlook (April 2010 and October 2014 editions). China India Brazil Russia 4 Global Trade as a Percent of GDP Has Plateaued Over the Last Three Years Global Goods & Services Exports as a Percent of GDP Percent 35 30 2014 (est.) 25 20 15 10 1980 1985 1990 1995 2000 2005 2010 2015 Only Note: See notes in text. Source: World Bank, World Development Indicators; United Nations Conference on Trade and Development; CBP World Trade Monitor (data through September 2014); International Monetary Fund, World Economic Outlook (October 2014 edition). 5 Current Account Balances Have Recently Narrowed, with the Notable Exceptions of Germany and the United Kingdom Global Current Account Balances Percent of Domestic GDP 12 2014:Q3 China 10 Germany 8 6 4 Japan 2 0 ‐2 ‐4 ‐6 ‐8 2000 Source: National Sources United States 2003 UK 2006 2009 2012 2015 6 The Income Share of the Top Percentile Has Increased in Many Countries Top 1 Percent Income Share Percent of national income 25 20 United States 15 10 5 India Japan France United Kingdom China 0 1915 1925 1935 1945 1955 1965 1975 1985 1995 2005 Source: Facundo Alvaredo, Tony Atkinson, Thomas Piketty and Emmanuel Saez, The World Top Incomes Database. 7 Global Inequality Has Remained Stable Since the 1990s International and Global Inequality Gini Coefficient 74 2008 72 70 68 66 64 62 60 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 Source: Milanovic, Branko. Global Inequality by the Numbers: in History and Now. The World Bank Development Research Group Poverty and Inequality Team. 8