How many years of economic output has the rich world lost?
SINCE the financial crisis struck in 2008, the economic output of most of the rich world has stalled. By the end of the last quarter of 2011, GDP in the 34 countries of the OECD was 6.8% lower than it would have been had it continued at its 1995-2007 trend growth rate of 2.7% on average. In monetary terms, that's $2,200 per person. According to the IMF's latest economic growth forecasts for the years up to 2017, released on April 17th, it will take OECD countries another 2.7 years to reach its pre-crisis trend level of economic output. Applying these calculations to individual countries, it is clear that the PIIGS have become particularly stuck in the mud, as can be seen in the chart below.
Italy is the most deeply mired; forecasts suggest it will take 15 years to get back to where it would be now had the crisis not hit. Ireland has lost 11 years for different reasons; growth is forecast to be reasonably strong at 2.6% a year on average, but its pre-crisis trend growth rate was so high that it will take years to catch up (see the second chart below for an illustration of the linear trend gap). Not everyone has lost time. There are six OECD countries (Chile, Israel, Poland, Slovakia, Switzerland and Turkey) which have out-performed their pre-crisis growth trend, and are not shown here.