The Future of the Global Economy Augusto López-Claros, Ph.D. International Environment Forum Brighton, United Kingdom December 18, 2010

2 Global Economic Outlook Macroeconomic Outlook (% GDP Growth) World Output Advanced Economies US Japan Euro Area Germany France Italy Middle East and N. Africa Sub-Saharan Africa Western Hemisphere Brazil Mexico China India Russia

3 Rising Public Debt Public Debt (in % of GDP)

4 United States Public Debt (in % of GDP)

5 U.S. Deficits: Largest in History U.S. Fiscal Deficit: (% of GDP) Source: IMF World Economic Outlook

6 Advanced economies’ gross financing needs, 2010 (In percent of GDP) Maturing debtDeficit Gross financing needsGross debt* Average maturity** Australia Belgium Canada France Germany Greece Ireland Italy Japan Portugal Spain Sweden United Kingdom United States Source: IMF, Fiscal Monitor 2010 * In ** In years.

7 Projected Change of Elderly Projected shares of elderly in total population by region (in percent)

8 Radically different growth experiences GDP per capita (PPP in US $)

9 Growth Experiences Average annual per capita income growth 1970s1980s1990s poorest countries Other developing countries

10 Sustainable Economic Welfare Index of Sustainable Economic Welfare: United States

11 Sustainable Economic Welfare Gross National Product Minus Cost of commuting Cost of personal pollution control Cost of auto accidents Cost of water pollution Cost of air pollution Cost of noise pollution Loss of wetlands Loss of farmland Depletion of nonrenewable resources Long-term environmental damage … Equals Sustainable Economic Welfare

12 Average GDP per capita in dollars Average income level High-income countries$37,787 Upper-middle-income countries $6,942 Lower-middle-income countries $2,286 Low income countries$567 Source: World Bank 2008 country classification, IMF, The Economist Democracy Index

13 Decile shares of global income (2002, in %) DecilePercentage shares First0.61 Second0.94 Third1.25 Fourth1.62 Fifth2.19 Sixth3.13 Seventh4.99 Eight8.26 Nineth19.71 Tenth57.52 Total100 Top ventile31.34 Top to bottom decile ratio94.6 Source: Branko Milanovic, World Bank

14 Extreme poverty: 2005 Total1374 (21%) India456 Africa388 China208 Latin America45 Millions of people with income under $1.25/day 2005 Total2562 (39%) India828 Africa557 China447 Latin America91 Millions of people with income under $2/day World Population: 6600

15 Poverty Millions of people with income under $1.25/day Millions of people with income under $2/day

16 Evolution of Social Indicators Infant mortality rate (per 1000 live births) Average life expectancy (years) 4366 Illiteracy rate (% of adults) 5318

17 Implications of Population Growth Population Growth from 1800 to 2050 (billions) Energy consumption Burdens of scale of human / economic activity on environment Consequences ― Global warming ― Loss of tropical forests ― Bio-diversity loss

18 A regulatory nightmare Doing Business Report: An international perspective on regulation ArgentinaBrazilMexicoVenezuelaIndiaChina New Zealand Ease of doing business* Starting a business* Number of procedures Time (days) Dealing with construction permits* Employing workers* Registering property* Time (days) Protecting investors* Paying taxes* Enforcing contracts* Time (days) Closing a business* Time (years) * Ranking sobre 181 países Fuente: Doing Business Report 2009

19 Corruption vs. Regulation

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21 Current Account Balances (in billions of US $) Country United States Spain United Kingdom Australia Italy France China Germany Japan Norway5569 Russia7770 Switzerland4450 Korea626 Saudi Arabia9329 Kuwait5035

22 China: Current Account Balances

23 Dollar to Euro exchange rate January 1999 to October 2010 Source: Board of Governors of the Federal Reserve

24 Governance Gap Global problems requiring collective action  Management of global environment  Fight against poverty  Global financial architecture  Nuclear proliferation  Illegal drugs  Terrorism and conflict prevention  Trade liberalization and distribution of benefits  Education