Journal Issue

WEO press conference: The global economy after September 11

International Monetary Fund. External Relations Dept.
Published Date:
January 2002
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The events of September 11 and their aftermath have resulted in a sharp deterioration in confidence across the globe, which has contributed to a downward revision in the IMF’s projection for world growth in 2002 to 2.4 percent from 3.5 percent a few months ago. The previous forecast, prepared before September 11, was published in the October 2001 World Economic Outlook (WEO) (see table, page 2). The latest projections were prepared for an interim update of the October report. Kenneth Rogoff, IMF Economic Counsellor and Director of the Research Department, explained at a December 18 press conference that the IMF prepares interim reports (the WEO is regularly published twice a year) when there have been rapid and significant changes in economic conditions. The latest interim WEO provides a “preliminary assessment of the, events of September 11, their effects on the global economy, and how they fit in with the broader economic slowdown,” Rogoff said.

Growth in both the advanced and the developing countries is projected to slow down sharply in 2002—projections have been revised downward by 1.3 and 0.9 percentage points, respectively, since the October 2001 WEO. However, just looking at year-on-year growth numbers in this way might be misleading.

World output falls sharply after September 11(annual percent change)
Difference fromDifference from
December projections1pre-September 11 projections2December projections1pre-September 11 projections2
World output2.4-0.22.4-1.1
Advanced economies1.1-0.20.8-1.3
United States1.0-0.30.7-1.5
European Union1.7-0.11.3-0.9
Newly industrialized Asian economies0.4-0.62.0-2.2
Developing countries4.0-0.44.4-0.9
Western Hemisphere1.0-0.71.7-1.9
Middle East, Malta, and Turkey1.8-0.53.9-0.9
World trade volume (goods and services)1.0-1.82.2-3.1

Interim WEO projections include data compiled on the basis of information available through early December 2001.

October 2001 WEO projections include data compiled on the basis of information available through end-August 2001.

Data: Interim World Economic Outlook, December 2001

Interim WEO projections include data compiled on the basis of information available through early December 2001.

October 2001 WEO projections include data compiled on the basis of information available through end-August 2001.

Data: Interim World Economic Outlook, December 2001

In periods where there are rapid changes in growth, Rogoff said that it may be better to compare output in one quarter to output in the same quarter of the previous year. For example, the 2002 year-on-year growth projection for the United States is 0.7 percent, which masks the expected recovery in the second half of 2002. More meaningful, he said, is growth from the last quarter of 2001 to the last quarter of 2002, which is projected at 2.6 percent.

Current versus previous slowdowns

It is interesting to compare the current slowdown with previous ones of recent decades, Rogoff said. Global growth in 2001 and 2002 in the current slowdown—estimated at 2.4 percent in both cases—is higher than in the 1975,1982, and 1991 slowdowns. It is also interesting, he observed, to look at global population growth during these slowdowns to see what was happening with per capita global GDP. In 1982, global output growth was 1.1 percent and population growth was 1.7 percent, so per capita global GDP was negative in 1982. This is also true for 1975 and 1991. However, in the current slowdown, with population growth estimated to be 1.3 percent in 2001, per capita global GDP growth is positive. Thus, compared to earlier slowdowns, particularly if one looks at per capita global GDP, the current slowdown is milder.

Does that mean that the current slowdown is not serious? No, Rogoff said, and he added that some major countries are in recession or close to it, including the United States, Japan, and Germany. However, growth in some other large countries, such as China, India, and Russia, has remained quite robust.

Are the forecasts accurate?

With regard to the forecasts, “this is a period of greater than usual uncertainty,” Rogoff said. Generally, the spread of opinion of forecasters narrows as one gets closer to the projected year because more information becomes available. In recent months, however, taking the United States as an example, uncertainty about the forecasts (measured in terms of the variation across different private sector forecasts) rose rapidly as a result of the terrorist attacks. Indeed, Rogoff commented that the spread was so large that one could not meaningfully speak ofa consensus forecast. In December 2001, however, the spread remained surprisingly large compared to other Decembers.

Although there are large downside risks to the 2002 projections, Rogoff indicated that there is still a possibility that the recovery could come more rapidly than expected. There is, he said, substantial policy stimulus in the pipeline, particularly from interest rates; the war on terrorism in Afghanistan could end sooner than expected; and there is the possibility of downside risks to oil prices. Still, Rogoff noted, the outcome for 2002 could be worse. The interim WEO presents an alternative scenario that combines some factors related to business and consumer confidence and global risk aversion that could get worse. “There are also many other potential sources of weakness in the world economy,” Rogoff said. This is a period of significant uncertainty.

The text of the World Economic Outlook, as well as a transcript of Rogoff’s December 18 press briefing, is available on the IMF’s website ( Printed copies are available from IMF Publication Services at $42.00 each (academic rate: $35.00). See page 9 for ordering information.

Photo credits: Denio Zara, Padraic Hughes, Pedro Márquez, and Michael Spilotro for the IMF, pages 1–4, 7,10, 12, and 14–16; Savita Kirloskar for Reuters, page 4; World Bank Institute, page 6; Ian Barret for Reuters, page 8; Thierry Roge for Reuters, page 16.

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