Global Growth: The *Old* Normal?

Alexander Naumov at Bank Underground.

Global growth: The *old* normal?: “Too slow for too long”, referring to global GDP growth, was the title of a recent IMF publication. But is world economic growth really that slow? Looking at the data over the past several decades, global growth since the crisis does not appear particularly weak; at least not in a historical perspective

Still, there is more to this chart…

Two more observations stand out. First, global growth was very strong in the five years immediately before the global financial crisis, but this period was rather an exception than a rule in the past 35 years that the latest IMF dataset covers. Second, the composition of global growth has changed dramatically. That is, while growth has been in line with historical norms globally, the contribution of advanced economies (AEs), shown in blue, has shrunk considerably; whereas the contribution of emerging market economies (EMEs) shown in red, has grown substantially.

Finally, even if world GDP growth today is close to trend, it is being buttressed by unprecedented monetary policy actions. So the answer to the question of how weak global growth currently is, among other things, will depend on your view of how much stimulus the current low policy rates and other unconventional measures provide to the real economy.