Download Global Imbalances: A Regional Focus

Global Imbalances:
How much adjustment will we see?
In The Zone Conference – University of Western Australia
9 November 2009
David Gruen
Executive Director, Macroeconomic Group
Global Imbalances
 Implicated in the global financial crisis
 Desirable that they become much smaller
Current Account Balances
Per cent of world GDP
3
Per cent
Per cent
3
2
2
1
1
0
0
-1
-1
-2
-2
Forecast
-3
-3
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
Germany and Japan
Selected Oil Exporters
Selected Developing Asia
United States
Selected CAD Countries
Rest of World
Source: IMF WEO Database, Treasury.
Global Imbalances
 Can examine from the perspective of trade
imbalances (exports and imports) and net
foreign income flows
 Or national saving and investment – a more
fundamental perspective
Savings and Investment – China
Per cent of GDP
60
Per cent
Per cent
60
50
50
40
40
Forecast
30
30
20
20
10
10
0
0
-10
-10
1990
1992
1994
1996
1998
2000
Current account balance
Source: CEIC China Database, IMF WEO Database, Treasury.
2002
Savings
2004
2006
Investment
2008
2010
Savings and Investment – Other East Asia
Per cent of GDP
40
Per cent
Per cent
40
30
30
20
20
Forecast
10
10
0
0
-10
-10
1990
1992
1994
1996
1998
2000
Current account balance
2002
Savings
Note: Excludes Taiwan and Vietnam due to data limitations.
Source: IMF WEO Database, Treasury, World Development Indicators.
2004
2006
Investment
2008
2010
Capital Flows into Developing Asia
Per cent of GDP
8
Per cent
Per cent
6
8
6
Forecast
4
4
2
2
0
0
-2
-2
-4
-4
-6
-6
-8
-8
-10
-10
-12
-12
1990
1992
1994
1996
Direct Investment
Official Flows
Source: IMF WEO Database.
1998
2000
2002
Portfolio
Reserves accumulation
2004
2006
2008
Other Private Flows
Total
2010
Savings and Investment – US
Per cent of GDP
30
Per cent
Per cent
30
20
20
10
10
Forecast
0
0
-10
-10
1990
1992
1994
1996
1998
2000
Current account balance
Source: IMF WEO Database.
2002
Savings
2004
2006
Investment
2008
2010
Savings and Investment – Australia
Per cent of GDP
30
Per cent
Per cent
20
30
20
Forecast
10
10
0
0
-10
-10
1990-91 1992-93 1994-95 1996-97 1998-99 2000-01 2002-03 2004-05 2006-07 2008-09 2010-11
Current account balance
Source: ABS 5206.0, ABS 5302.0, Treasury.
Savings
Investment
Household Consumption
Per cent of GDP
75 Per cent
Per cent 75
70
70
US
65
65
60
60
55
55
50
50
45
45
40
40
35
Sep-79
Sep-82
Sep-85
Sep-88
Sep-91
Sep-94
Sep-97
Sep-00
Source: Australian Bureau of Statistics, Bureau of Economic Analysis, CEIC China Database.
Sep-03
Sep-06
35
Sep-09
Household Consumption
Per cent of GDP
75 Per cent
Per cent 75
70
70
US
65
65
Australia
60
60
55
55
50
50
45
45
40
40
35
Sep-79
Sep-82
Sep-85
Sep-88
Sep-91
Sep-94
Sep-97
Sep-00
Source: Australian Bureau of Statistics, Bureau of Economic Analysis, CEIC China Database.
Sep-03
Sep-06
35
Sep-09
Household Consumption
Per cent of GDP
75 Per cent
Per cent 75
70
70
US
65
65
Australia
60
60
55
55
50
50
China
45
45
40
40
35
Sep-79
Sep-82
Sep-85
Sep-88
Sep-91
Sep-94
Sep-97
Sep-00
Source: Australian Bureau of Statistics, Bureau of Economic Analysis, CEIC China Database.
Sep-03
Sep-06
35
Sep-09
Real Effective Exchange Rates
2005 = 100, monthly
130 Index
Index 130
120
120
Renminbi
110
110
100
100
USD
90
90
80
80
70
1994
70
1996
1998
Source: Bank of International Settlements.
2000
2002
2004
2006
2008
Global Imbalances: Conclusions
 Current forecasts suggest imbalances will
become somewhat smaller
 Further adjustment will require:
– a sustained rise in US national saving
– a sustained rise in domestically sourced growth
in Asia
– further adjustment of real exchange rates