Global Economic Perspectives On Fiscal Policy, Oil Prices, And The Trade Slowdown

Two chapters from the World Bank’s Global Economic Perspectives
 are out.

Chapter 3 is “Fiscal Policy Challenges in Developing Economies”.

Over the past three decades, fiscal policy in developing countries has become increasingly countercyclical. The wide fiscal space accumulated prior to the global financial crisis not only made it possible for developing countries to implement fiscal stimulus during the crisis, but also made the stimulus more effective in supporting growth as fiscal multipliers tend to be higher in countries with greater fiscal space. …

Chapter 4 covers three topics. The first is “Understanding the Plunge in Oil Prices”:

… There are a number of drivers behind the recent plunge in oil prices: several years of upward surprises in oil supply and downward surprises in demand, unwinding of some geopolitical risks that had threatened production, changing OPEC policy objectives, and appreciation of the U.S. dollar. …

The second is “What Lies Behind the Global Trade Slowdown?”:

Since the financial crisis, activity in many developing countries has been adversely affected by weak global trade. In 2012 and 2013, global trade grew less than 3.5 percent, well below the pre-crisis average of 7 percent. Part of this slowdown can be attributed to cyclical forces—especially, the slowdown in import demand that reflects weak growth in advanced economies. However, structural forces were also at work. In particular, the sensitivity of trade flows to changes in global activity between the pre-crisis 2000s and the post-crisis period halved.

The third section addresses the question “Can Remittances Help Promote Consumption Stability?”.