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Global Economic Prospects, June 2010 : Fiscal Headwinds and Recovery

access to capital asset classes asset price balance sheets Bank claims bank lending banking system bankruptcy basis point basis points bond bond flows bond issuance bond issuances bond issues bond markets bond spread bond spreads bond yields boost to growth borrowing costs budgetary support capital account capital account restrictions capital flows capital inflows capital investment capital investments capital markets capital outflows carbon emissions CDS Central Bank commercial banks commodities Commodity Commodity price Commodity Prices consumer durables corporate bonds corporate borrowers corporate yields cost of capital country risk credibility credit default credit default swaps credit ratings creditor creditor banks creditors Current account balances current account deficits debt crisis debt flows debt issuance debt levels debt obligations debt ratio debt repayments Debtor Debtor Reporting System developing countries developing country developing country stock markets developing economy disbursements domestic markets durable durable goods Emerging market Emerging market equities equities equity flows equity market equity market volatility exchange rate exchange rates export growth exporters exposure exposures external debt external financing Federal Reserve financial capital Financial Crises financial crisis financial developments financial health financial institutions financial integration financial sector financial sectors financing requirements fiscal consolidation fiscal consolidations fiscal deficit fiscal deficits fiscal policy food price Food prices global economy global equity global equity markets global exports global financial markets global financial system global market global markets global trade government accounts government bonds Government debt government debts government deficits government expenditure government spending growth rates human capital income indebted countries indebtedness individual firms inflation inflationary pressures insurance interest rate interest rate differentials interest rates international bank international bank lending international bond international capital international capital flows international capital markets international financial institutions international market inventories inventory investment decisions investment projects Labor Market lender liquidity loan loan exposures local currency long term debt long-term interest long-term interest rate long-term interest rates long-term yield long-term yields loss of confidence low-income countries market access market conditions market expectations Market Index market indices market prices market valuations market volatility maturity middle-income countries Monetary Fund monetary policy moral suasion net capital Net debt Nonperforming loans oil price oil prices output output gaps pension portfolio power parity principal payments Private capital Private capital flows private capital inflows Private creditors Private Debt private investment private sector growth public debt public finances purchasing power rate of growth real estate real interest real interest rates remittance remittances repayment reserves residential mortgages return risk aversion risk premiums savings security concerns short-term debt short-term interest rates solvency sovereign bond sovereign debt Sovereign risk stock index Stock market stock markets stocks tax trade deficit transition countries treasury treasury note treasury securities volatility wealth effects world economy World Trade
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Washington, DC
Africa | East Asia and Pacific | Europe and Central Asia | Latin America & Caribbean | South Asia | Middle East and North Africa | Africa | East Asia | Europe | North Africa | North America | South Asia | Middle East | Europe and Central Asia | Sub-Saharan Africa | Latin America
2013-01-04T20:53:44Z | 2013-01-04T20:53:44Z | 2010-06

Market nervousness concerning the fiscal positions of several European high-income countries poses a new challenge for the world economy. This arises as the recovery is transitioning toward a more mature phase during which the influence of rebound factors (such as fiscal stimulus) fades, and gross domestic product (GDP) gains will increasingly depend on private investment and consumption. So far evolving financial developments in Europe have had limited effects on financial conditions in developing countries. Although global equity markets dropped between 8 and 17 percent, there has been little fallout on most developing-country risk premia. And despite a sharp deceleration in bond flows in May, year-to-date capital flows to developing countries during the first 5 months of 2010 are up 90 percent from the same period in 2009. The economic impact on long-term growth in developing countries of a forced pullback from growth-enhancing infrastructure and human-capital investment due to lower fiscal revenues, weaker official development assistance (ODA), and sluggish capital flows, are difficult to gauge, as are the effects on private sector growth of tighter financial sector regulations, and increased competition for capital from high-income sovereigns. Global economic prospects: crisis, finance and growth estimated that just the latter two factors could reduce developing country growth rates by between 0.2 and 0.7 percent for a period of 5 to 7 years.

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