Output gaps in developing countries

Posted: January 17, 2014 in economy
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The GDP of developing countries rose by an estimated 4.8% in 2013, almost 1% below potential GDP (the output consistent with full employment and stable inflation). The difference between actual and potential growth, expressed as a percentage of potential GDP, is known as the output gap. Overall, it has narrowed and is only slightly negative, compared with the large positive output gaps of boom years before the great recession. The recent slowdown has eased excess demand pressures in some countries, notably Brazil. India faces stubbornly high inflation and a widening negative output gap. Social and political turmoil in the Middle East and north Africa continues to keep output below potential.

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The Economist Newspaper


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