Global economic outlook
19
After a precipitous fall in late 2011, the first half of 2012 saw currencies in most developing countries and the economies in transition depreciating further against the United States dollar (figure I.12). This trend was driven by two main factors: the reduction in capital inflows to these countries and the weaker growth prospects for these economies. Since mid-2012, the exchange rates of most of these currencies have stabilized, and some of them started to rebound after the launches of the new QE in major developed countries. In the outlook, continued implementation of the open-ended QE in major developed countries will likely increase the volatility in the exchange rates of the currencies of developing countries and the economies in transition. Figure I.12 Exchange rates of selected developing country currencies vis-Ă -vis the United States dollar, January 2002-October 2012 Index: January 2002 Index,2 January 2000 == 100 100 Brazilian real Korean won South African rand
250
200
150
100
Jul-2012
Jan-2012
Jul-2011
Jan-2011
Jul-2010
Jan-2010
Jul-2009
Jan-2009
Jul-2008
Jan-2008
Jul-2007
Jan-2007
Jul-2006
Jan-2006
Jul-2005
Jan-2005
Jul-2004
Jan-2004
Jul-2003
Jan-2003
Jul-2002
Jan-2002
50 Source: UN/DESA, based on data from JPMorgan Chase.
No benign global rebalancing Global imbalances, which refers to the current-account imbalances across major economies, have narrowed significantly in the aftermath of the global crisis. Even if widening slightly during 2012, they remain much smaller than in the years leading up to the crisis (figure I.13). Unfortunately, this trend cannot be seen as a sign of greater global financial stability and more balanced growth. External imbalances have fallen as a result of overall weakness in global demand and the synchronized downturn in international trade rather than through more structural shifts in savings rates and demand patterns. The United States remained the largest deficit economy, with an estimated external deficit of about $467 billion (3.1 per cent of GDP) in 2012, down substantially
External imbalances have fallen as a result of overall weakness in global demand