A couple of weeks ago, I looked at global economic growth and how the IMF’s estimates of growth in 2009 have changed over the course of the last 18 months. The main finding was that the world economy has different regions. South and East Asia, whose economic powerhouse is China, has seen a large upward revision in growth forecasts since earlier this year. The Americas, whose economic hegemon is the USA, has seen no such effect, while Europe has been somewhere in between. Government stimulus seems to have only a limited effect relative to the effect of international trade and trade networks.
While the topic of whose growth has rebounded most is certainly relevant, it is perhaps also an opportune time to review which countries have had their medium-term growth path most upset by the global recession. For example, while Singapore has had its growth revised upwards from -9% to -3% in the last few months, that is still -3% compared to what experts would have expected for Singapore in 2009 a couple of years ago, perhaps somewhere in the region of 3%. More importantly, if Singapore’s growth over the medium term, say 2010 to 2012, is now expected to be significantly lower than the IMF expected as recently as early 2008, we could describe Singapore as severely displaced by the recession. A way to think of it might be of countries getting knocked out of their stride by the recession.
So, which countries have been most affected by the recession? Comparing what the IMF forecast at the start of 2008 with what they’ve forecast in their most recent report, not surprisingly just 17 countries have had their 2010-2012 growth revised upwards over the last 18 months – and most of those are countries in some sort of recovery (Afghanistan, Zimbabwe, Myanmar). The typical country has had their 2010-2012 growth revised downwards by 1.2%. Twenty countries have been knocked out of their economic stride by at least three percentage points. The worst affected country is Madagascar, whose economic outlook has worsened in line with the deterioration of its political outlook. Half of the twenty worst affected countries, though, are post-Soviet countries, including four of the five worst hit economies (Bulgaria, Lithuania, Estonia and Moldova). This suggests a Russia effect – or at the very least a post-Soviet effect.
The economies with the ten biggest negative and positive shocks to growth since early 2008 are shown in the graph below, along with the median country. (Irish readers might be interested to note that it is not just a post-Soviet story – the UAE and Ireland, highlighted in green below, are among those worst hit, although there’s every reason to believe that Ireland’s presence is down to the coincidence of its domestic recession with the global recession, which the country has largely missed.)
Just like the story about whose growth has rebounded most, this looks to be a story that highlights the importance of regional/continental economic links. In addition to the relatively high openness to (or dependence on) trade in the region, Russia sits at the heart of the post-Soviet economy. Russia has had its 2010-2012 growth forecast revised down from almost 6% in early 2008 to less than 3% last month. Indeed, it has the dubious honour of being the only G8 country in practically the worst 100 affected economies (France and the US sneak in at 98 and 100). As Russia goes, so goes those economies that depend on it.