7 Things you need to know!

Over the course of the last year, we’ve been fielding increasing requests from people wanting to know about potentially joining a YouTube Network – Maker, Machinima, Revision3, to name a few. These networks can do a lot of things. Among their services are providing you with production support, helping link you as a creator with brands and finding brand deals, and an increased (usually flat rate) CPM. What they ask for in exchange varies – some ask to own your content, others ask to take a percentage of your revenue, and others may ask you to work with their other artists.

Online video “networks” bear striking similarities to the old Hollywood studio system in the 20s (Danny Zappin straight up says that’s basically what Maker is in this Fast Company article). Studios back then strove to do two things – first, to bring together a bunch of creatives and their means of production under one roof and own their content, and second, to control the means of distribution of that content. The same can essentially be said for how online networks are operating today – except that the control of the distribution is very easy for them (the studio system basically got sued trying to do that and that’s why theater chains aren’t owned by Universal Pictures or Paramount)

A good summary of these networks and what they do can be found here.

I consider what I’m about to say as essential advice for anybody who is approached by these networks or is interested in joining these networks. I am writing the following because I’m tired of seeing people get screwed by their contracts, or entering into legally binding relationships without fully understanding the implications of their actions. And most importantly – if we, the creators, band together and act as a unified front, we won’t be bullied by ridiculous contracts and business practices online – practices that have been, even by the standards of the entertainment industry, shockingly predatory.

Simply put, if we all follow the advice below, that means better deals for everybody.

Additionally, if you are not being pursued by a network or have no interest in joining a network, take a gander at this article anyway. We cover a lot of the mentality behind treating online video production as a business, and some of our tips may be helpful in a broader sense.

Before we begin, I strongly recommend you pick up a copy of Fisher and Ury’s Getting to Yes: Negotiating Agreement Without Giving In. It’s an invaluable manual for how to conduct yourself in a negotiation (which is what you’ll be doing with these networks).

Please note, before we continue – the following does not constitute legal advice. It’s for informational purposes only. If you need legal advice, you need an actual lawyer, which I am most certainly not.

In the interest of full disclosure – the FreddieW channel is represented by Collective Digital Studios. We followed all our own advice when we talked about signing on with them, and because of that, we’ve been very happy with our relationship.


1. As a content creator, you have something these networks need. You have the power.

You have content. That content has likely already proven itself to a certain extent – you probably have built some audience, or have some viewership, or you are simply making really good work – and that’s what they need. Their entire business model of these networks relies on people like you to supply them with content, which in turn generates viewership. No views on their channels means no money. No money means no business. Your content represents, simply put, a business opportunity. Therefore, you need to treat your interactions with any network as a business.

They are not your friends. They will not look out for your interests if there’s no direct benefit to them. Anything they say that isn’t backed up in writing is meaningless.

We’ve had networks tell us that our exclusivity to them was something we could “back out of anytime we wanted to” and that they would “let us leave.” The contract says otherwise, and when push comes to shove, what’s on the page is what sticks.

At the same time, they’re not your enemies. There’s no need to be adversarial. They have a business to run and so do you. There is no need to be intimidated – remember:You have something they need.

They’ll help you so long as it helps them, so it’s good to structure your deal in a way that this is possible – you want them to want to help you. This usually means giving them a percentage of the business they bring you. This is win-win for everyone – for you, you’ll get more opportunities than you would have otherwise. You get to be associated with their (probably) more powerful brand. For them, since they only get paid when you get paid, it’s in their best interests to get out there and find work for you. This is a relationship that fully acknowledges that each party is self-interested and provides for that fairly. What percentage is fair? We’ll talk about that in a bit.

Never agree to a relationship where they are passively siphoning off your income if they’re not improving your prospects beyond what you normally have. Always weigh what you’re getting versus what you’re giving away, and make sure it’s fair. Granted, in some cases the benefit might be an immediate CPM bump from what you’re used to. Make sure you calculate exactly what that bump is – do the math. Is what they’re taking proportional to what they’re bringing you?

How do you know what’s fair? There aren’t any hard rules – what’s fair for someone in one situation may be ridiculous for another. Trust your gut.

2. Never sign the first draft of a contract. Lawyer up and change it up.

Here’s how a contract usually works. Party A drafts up what they believe is a fair contract and sends it to Party BParty B makes changes to that contract and sends it back. Party A makes further changes. They go back and forth until they arrive at a contract that both parties agree on.

The receipt of a contract is the beginning of a negotiation. You have every right in the world to want things changed, and you must communicate those changes by altering the contract and sending it back.

I’ve seen a lot of the contracts they hand people right off the bat and frankly they are absurd. They should not be signed under any circumstances. These companies have legal teams or lawyers on retainer. These lawyers are paid very well to ensure their client gets the best possible deal at all times. Unless you have some background in entertainment law, you are not equipped to fight these guys.

Your first step is to read and re-read the contract until you get a grasp of it. Your next step is to find an entertainment lawyer, pay them their fee, and have them review the contract with you point-by-point to make sure you absolutely understand what’s going on. This lawyer will likely suggest and notate changes, and you should have some changes of your own. You should also have questions ready (many of which probably begin with the phrase “What if I…” or “Would this contract allow me to…”)

If you’re considering joining a network, you’re taking things seriously. Whatever fee you pay that lawyer will be well worth it.

You don’t need to call the network and ask them questions about their contract. They’re under no obligation to warn you of any caveats, and based on our off-the-record conversations with some of these networks, they may straight up lie to your face about what you’re signing. Remember – your lawyer (who you are paying) is the only person you can really trust.

Incidentally, make sure you outline out exactly what you’re looking for with any prospective lawyer and get a sense of how much it’ll cost. Remember – this is pretty basic contract/entertainment law – this isn’t negotiating out the director fees for The Avengers and you don’t need the world’s top lawyers on the case.

I have heard of people afraid to challenge the contract because they fear the network will pass them up and they’ll lose out on an opportunity. Remember Rule #1 – you have what they need.

3. If one network thinks you’re awesome, odds are the other ones do too.

Remember – they all need content, and believe me – there’s not a lot of good, proven content out there. If they think you got what it takes, then the fact is, you got what it takes for every other network as well.

Strong negotiation requires a good “Best Alternative to a Negotiated Agreement” or BATNA (This is outlined in great detail in the book I recommended). The beauty of being a YouTube Partner is that your BATNA is very strong – you can continue making money as a YouTube Partner. The allure of the network might be that you can makemore money, but you’re probably not totally desperate to sign on with them. You can always walk away.

If you don’t like what’s on the table you should willing to walk away and approach another network directly. You may not be able to tell that other network what the first network was offering (if you signed a non-disclosure agreement), but you can say you’re fielding offers from other networks and wanted to see what they could do for you.

In fact, the moment you get approached, get in contact with every other network who will listen, send them your stats and an outline of your channel, and see what they’ll offer you. Let them know you’re being courted by the other networks, and let them sling mud at each other. When the dust clears, pick the best deal.

4. Flat CPMs suck.

From our research, the CPM (cost per thousand impressions) rates these companies offer range anywhere from $2 – $5 or more. These are flat rates for video views. At first that sounds like a great deal, right? It’s a guaranteed amount and it’s probably more than what you’re making normally.

As a quick side note – students of internet history will be interested to know that those CPMs are paltry compared to the tech boom hey-day. Back then, you could be getting $15 CPMs or more for freaking pop-up ads! That was a good time to have a popular website.

Networks take all their creators and lump their stats together. When considered as a whole, those stats are mega-super impressive. Millions or billions of monthly video views. They then take this aggregate amount and use it to sell to advertisers (“Look guys! Look how many people we have!”), who in turn pay them a lot of money to access those views.

For all online advertising, CPMs differ from quarter to quarter. In the early parts of the year it might not be much, but come Q4 (i.e. the holiday season), advertising revenue shoots through the roof. A lot of this has to do with companies advertising for the holidays, as well as departments needing to spend their budgets so they can justify asking for more the following year. If you’ve ever worked on commercials, you’ll know the end of the year is a time when you can book gigs left and right.

It goes without saying that the CPMs the networks can get when selling an aggregate of channels is far more than whatever paltry sum they’re offering you as a flat rate (they’re trying to make a profit, after all). A $2 CPM might seem like a lot, until you realize that they could be selling your content at a CPM of $20 or more.

We even had a network tell us once that their CPMs were so great that their company lost money most of the year on that. Of course, what they didn’t mention is that they make that up in spades come the end of the year.

Instead, what we should all be asking for is a baseline flat CPM, coupled with a percentage of anything they sell above that. If times are slow and they’re breaking even with your content, fine. Getting the base rate is fair. But if they’re getting $20+ CPMs, I don’t think it’s fair that your content receives only a tiny fraction of that amount while the vast majority goes to lining their pockets, do you?

5. This is the internet – Time moves faster.

Looking at a two year contract? Two years is a lifetime on the internet. Two years ago, we had the Old Spice guy ads. Two years ago YouTube looked like this:

Two years ago the “freddiew” channel didn’t even exist. In two years we went from complete unknowns to a top 10 YouTube channel. A lot can happen in two years.

As a starting point you should be looking at a contract term that lasts from six months to a year, depending on the deal. It should go without saying but never take a lifetime contract.

One note: the reason they ask for a long term is so they can reasonably sell you to their advertisers throughout the year. Q4 content gets sold early – it does them no good to say “Hey, we have this guy” and have you potentially drop out before the time comes to execute. That’s fair – whatever you sign should take you through the end of the year at least.

But consider this – if you ask a network, they’re tell you that everyone is happy and everyone loves being part of that network. If they’re so confident that you’ll be in that same boat, you’ll be happy in 6 months, so you’ll just renew right then and there no questions asked.

Yet somehow, six months is not ok. If they’re so confident that you’ll be a part of their network, why do they seem to assume you’ll abandon them the moment your contract is done?

What’s baffling is many networks seem to be hell bent on holding their creators to their contract terms. It does nobody any good to do this – if someone hates working under a network, what do you think the quality of their content will be if they’re forced to continue churning it out for another few months?

6. The entertainment industry has guidelines for percentages. Use them as starting points.

While the whole business of online video and networks is relatively new, the business of “organizations taking a cut from talent” is most certainly not.

In general, in the world of entertainment, agents take 10%-15% and managers take 10%-15%. So why should we treat what we do as any different? These entities often are similar to YouTube networks in that both are looking to find you work, so anything more than that and there better be a very good reason for it. They need to be really bringing something to the table.

What they bring to the table depends strongly on what you actually need. Brandon and I, for example, don’t really need much help in the VFX department, but maybe they’ll offer you things you do need – maybe you could use a team of cameramen, or actors, or writers. Whatever they offer, make sure it’s better than what you could do yourself. Otherwise, you’re just taking a step backward.

Always weigh the cost/benefit of letting a network step in and fill a production need, or simply using money to fill that need yourself. In the end, you don’t want to become so reliant on the network to be providing you with cameras and shooters and locations that, if time comes you’re no longer happy, you’ll be unable to leave them because so much of your business’ infrastructure is tied in with them.

One way to incentivize them to work harder for you might be to have different percentage tiers depending on how much work they bring you. That way, there will be some motivation on their part to bring you additional of work because that’ll allow them to take a bigger cut, which is totally fair. Sales Agents for feature films will sometimes do something like this – their rake might enter into a higher percentage tier after they’ve sold a certain amount.

Remember – there aren’t any rules or any “right” way to do this. If it makes sense, odds are it’ll probably work.

7. Do your research. Interview people under the network.

Any prospective network should have no issues whatsoever putting you in touch with people so you can ask them about their experiences. Find people of similar size to your channel. Take them out to lunch. Ask them how their experience has been. What, if anything, would they change? Get a real sense of the vibe of the place before you throw your chips in – this is very important. You might negotiate a great deal, but if you’re not happy there, it won’t be worth it.

You should have a sense of what you need and what these networks can provide for you. This is very important because your relative influence in this negotiation depends entirely on this factor – if there’s nothing they can offer you, you’re in a very strong position. If you would rely on them for a lot of stuff, you’re in a weaker position, and will have to negotiate accordingly.

Don’t compare yourself to the superstars of the network. Instead, look at the entire range, and see how everyone, as a whole, is doing. Try and get a sense of the bigger picture.

Finally, a special bonus 8th thing reserved for people trying to actively leave their contracts right now or are so unhappy they want to terminate it. Check to see if there’s a termination clause in the contract. If there is, invoke it to the letter. If not, there’s still hope – lawyer up and get their opinion.

After all’s said and done, we think networks can be a major boost for content creators, and can be incredibly beneficial, provided said content creator does the legwork to make sure they understand their deal and that it’s a fair deal to begin with. These networks are not your friends – they’re potential business partners. Never make the mistake of confusing courtship with friendship. They want to bring you in – so make sure you’re doing everything you can to get a fair deal.

That being said, in our experience, the vast majority of people’s experiences with joining networks have been very positive. Just make sure you cover your bases so that if something does go wrong, you’re not screwed.

Good luck! If you have any questions, I’d be happy to answer them below, and I’m sure the rest of the RocketJump community can chime in on their experiences as well.

p.s. Never give up your Facebook or Twitter. That’s your first point of contact with your audience. You should have full approval of everything that goes through those.


Edit: List of Networks

Based on some feedback I’ve gotten, it sounds like it’d be useful to know what’s out there. here’s a list of networks that are out there (I’m playing loose with that definition – some of these are less “Networks” and more “conglomerations of channels” or “record labels.” Some of these are also subsidiaries of other companies on this list.) If there are any I’ve missed, let me know in the comments section below.

Big Frame


ChannelFlip (Must have British accent)

Collective Digital Studios

Curse Network

DFTBA Records


The Game Station


Maker Studios

Next New Networks




Read more: http://www.rocketjump.com/blog/youtube-networks-7-things-you-need-to-know/5

IMF – World Economic Outlook Update

Further Policy Action Needed

In the past three months, the global recovery, which was not strong to start with, has shown signs of further weakness. Financial market and sovereign stress in the euro area periphery have ratcheted up, close to end-2011 levels. Growth in a number of major emerging market economies has been lower than forecast. Partly because of a somewhat better-than-expected first quarter, the revised baseline projections in this WEO Update suggest that these developments will only result in a minor setback to the global outlook, with global growth at 3.5 percent in 2012 and 3.9 percent in 2013, marginally lower than in the April 2012 World Economic Outlook. These forecasts, however, are predicated on two important assumptions: that there will be sufficient policy action to allow financial conditions in the euro area periphery to ease gradually and that recent policy easing in emerging market economies will gain traction. Clearly, downside risks continue to loom large, importantly reflecting risks of delayed or insufficient policy action. In Europe, the measures announced at the European Union (EU) leaders’ summit in June are steps in the right direction. The very recent, renewed deterioration of sovereign debt markets underscores that timely implementation of these measures, together with further progress on banking and fiscal union, must be a priority. In the United States, avoiding the fiscal cliff, promptly raising the debt ceiling, and developing a medium-term fiscal plan are of the essence. In emerging market economies, policymakers should be ready to cope with trade declines and the high volatility of capital flows.

A better Q1, a worse Q2

Global growth increased to 3.6 percent (seasonally adjusted annual rate) in the first quarter of 2012, surprising on the upside by some ¼ percentage point compared with the forecasts presented in the April 2012 World Economic Outlook (Figure 1CSV|PDFTable 1). The upward surprise was partly due to temporary factors, among them easing financial conditions and recovering confidence in response to the European Central Bank‘s (ECB’s) longer-term refinancing operations (LTROs). Global trade rebounded in parallel with industrial production in the first quarter of 2012, which, in turn, benefited trade-oriented economies, notably Germany and those in Asia. For Asia, growth was also pulled up by a greater-than-anticipated rebound in industrial production, spurred by the restart of supply chains disrupted by the Thai floods in late 2011, and stronger-than-expected domestic demand in Japan.
Figure 1

Table 1. Overview of the World Economic Outlook Projections
(Percent change unless noted otherwise)
Year over Year
Projections Difference fromApril 2012 WEO Projections Q4 over Q4
Estimates Projections
2010 2011 2012 2013 2012 2013 2011 2012 2013
World Output 1/ 5.3 3.9 3.5 3.9 –0.1 –0.2 3.2 3.4 4.1
Advanced Economies 3.2 1.6 1.4 1.9 0.0 –0.2 1.2 1.4 2.2
United States 3.0 1.7 2.0 2.3 –0.1 –0.1 1.6 1.9 2.5
Euro Area 1.9 1.5 –0.3 0.7 0.0 –0.2 0.7 –0.2 1.2
    Germany 3.6 3.1 1.0 1.4 0.4 –0.1 2.0 1.0 1.8
    France 1.7 1.7 0.3 0.8 –0.1 –0.2 1.2 0.4 1.1
    Italy 1.8 0.4 –1.9 –0.3 0.0 0.0 –0.5 –1.9 0.4
    Spain –0.1 0.7 –1.5 –0.6 0.4 –0.7 0.3 –2.3 0.6
Japan 4.4 –0.7 2.4 1.5 0.4 –0.2 –0.5 1.9 2.2
United Kingdom 2.1 0.7 0.2 1.4 –0.6 –0.6 0.5 0.8 1.2
Canada 3.2 2.4 2.1 2.2 0.1 0.0 2.2 2.1 2.1
Other Advanced Economies 2/ 5.8 3.2 2.4 3.4 –0.2 –0.1 2.5 3.2 3.3
    Newly Industrialized Asian Economies 8.5 4.0 2.7 4.2 –0.6 0.0 3.0 4.4 3.6
Emerging and Developing Economies 3/ 7.5 6.2 5.6 5.9 –0.1 –0.2 5.8 5.9 6.5
Central and Eastern Europe 4.5 5.3 1.9 2.8 0.0 –0.1 3.8 1.5 3.6
Commonwealth of Independent States 4.8 4.9 4.1 4.1 0.0 –0.1 4.4 3.1 4.5
    Russia 4.3 4.3 4.0 3.9 0.0 –0.1 4.6 2.7 4.8
    Excluding Russia 6.0 6.2 4.5 4.5 –0.1 –0.1 . . . . . . . . .
Developing Asia 9.7 7.8 7.1 7.5 –0.3 –0.4 7.2 7.7 7.6
    China 10.4 9.2 8.0 8.5 –0.2 –0.3 8.9 8.4 8.4
    India 10.8 7.1 6.1 6.5 –0.7 –0.7 6.2 6.4 6.4
    ASEAN-5 4/ 7.0 4.5 5.4 6.1 0.0 –0.1 2.6 7.5 6.4
Latin America and the Caribbean 6.2 4.5 3.4 4.2 –0.3 0.1 3.6 3.5 5.1
    Brazil 7.5 2.7 2.5 4.6 –0.6 0.5 1.4 4.2 4.0
    Mexico 5.6 3.9 3.9 3.6 0.3 0.0 3.9 3.4 4.2
Middle East and North Africa 5.0 3.5 5.5 3.7 1.3 0.0 . . . . . . . . .
Sub-Saharan Africa 5.3 5.2 5.4 5.3 –0.1 0.0 . . . . . . . . .
    South Africa 2.9 3.1 2.6 3.3 –0.1 –0.1 2.6 2.8 3.7
European Union 2.0 1.6 0.0 1.0 0.0 –0.3 0.8 0.1 1.5
World Growth Based on Market Exchange Rates 4.2 2.8 2.7 3.2 0.0 –0.2 2.3 2.5 3.4
World Trade Volume (goods and services) 12.8 5.9 3.8 5.1 –0.3 –0.5 . . . . . . . . .
    Advanced Economies 11.5 4.4 1.9 4.2 0.0 0.1 . . . . . . . . .
    Emerging and Developing Economies 15.3 8.8 7.8 7.0 –0.6 –1.1 . . . . . . . . .
    Advanced Economies 12.2 5.4 2.3 4.3 0.0 –0.3 . . . . . . . . .
    Emerging and Developing Economies 14.4 6.6 5.7 6.2 –0.9 –1.0 . . . . . . . . .
Commodity Prices (U.S. dollars)
Oil 5/ 27.9 31.6 –2.1 –7.5 –12.4 –3.4 20.8 –7.7 –2.1
Nonfuel (average based on world commodity export weights) 26.3 17.8 –12.0 –4.3 –1.7 –2.2 –6.4 –3.9 –2.5
Consumer Prices
Advanced Economies 1.5 2.7 2.0 1.6 0.1 –0.1 2.8 1.8 1.7
Emerging and Developing Economies 3/ 6.1 7.2 6.3 5.6 0.1 0.0 6.5 5.8 3.9
London Interbank Offered Rate (percent) 6/
On U.S. Dollar Deposits 0.5 0.5 0.8 0.8 0.0 0.0 . . . . . . . . .
On Euro Deposits 0.8 1.4 0.7 0.6 –0.1 –0.2 . . . . . . . . .
On Japanese Yen Deposits 0.4 0.3 0.4 0.3 –0.2 0.2 . . . . . . . . .
Note: These forecasts incorporate information received through Friday, July 6, 2012. Real effective exchange rates are assumed to remain constant at the levels prevailing during May 7–June 4, 2012. When economies are not listed alphabetically, they are ordered on the basis of economic size. The aggregated quarterly data are seasonally adjusted.
1/The quarterly estimates and projections account for 90 percent of the world purchasing-power-parity weights.
2/Excludes the G7 and euro area countries.
3/The quarterly estimates and projections account for approximately 80 percent of the emerging and developing economies.
4/Indonesia, Malaysia, Philippines, Thailand, and Vietnam.
5/Simple average of prices of U.K. Brent, Dubai, and West Texas Intermediate crude oil. The average price of oil in U.S. dollars a barrel was $104.01 in 2011; the assumed price based on futures markets is $101.80 in 2012 and $94.16 in 2013.
6/Six-month rate for the United States and Japan. Three-month rate for the euro area.

Developments during the second quarter, however, have been worse (Figure 2:CSV|PDF). Relatedly, job creation has been hampered, with unemployment remaining high in many advanced economies, especially among the young in the euro area periphery.
Figure 2
The euro area periphery has been at the epicenter of a further escalation in financial market stress, triggered by increased political and financial uncertainty in Greece, banking sector problems in Spain, and doubts about governments’ ability to deliver on fiscal adjustment and reform as well as about the extent of partner countries’ willingness to help. Escalating stress in periphery economies has manifested itself along lines familiar from earlier episodes, including capital outflows, a renewed surge in sovereign yields (Figure 3CSV|PDF), adverse feedback loops between sovereign stresses and banking sector funding problems, increases in Target 2 liabilities of periphery central banks, further bank deleveraging, and contraction in credit to the private sector. The stabilizing effects of the ECB’s LTROs in periphery financial markets have thus eroded. On the real side, leading economic indicators presage renewed contraction of activity in the euro area as a whole in the second quarter.
Figure 3
Incoming data for the United States also suggest less robust growth than forecast in April. While distortions to seasonal adjustment and payback from the unusually mild winter explain some of the softening, there also seems to be an underlying loss of momentum. Negative spillovers from the euro area, limited so far, have been partially offset by falling long-term yields due to safe haven flows (see below).

Growth momentum has also slowed in various emerging market economies, notably Brazil, China, and India. This partly reflects a weaker external environment, but domestic demand has also decelerated sharply in response to capacity constraints and policy tightening over the past year. Many emerging market economies have also been hit by increases in investor risk aversion and perceived growth uncertainty, which have led not only to equity price declines, but also to capital outflows and currency depreciation. In global financial markets (Figure 4CSV|PDF), prices of risky assets declined during much of the second quarter, notably equity prices, while yields on safe haven bonds (Germany, Japan, Switzerland, and the United States) retreated to multidecade lows (see also the July 2012 Global Financial Stability Report Market Update). With some of the capital flows into perceived safe assets occurring within the euro area, the weakening of the euro has been limited. However, sovereign debt markets in the euro area periphery remain unsettled.
Figure 4
Commodity prices have also fallen. Among major commodities, prices of crude oil declined the most in the second quarter—at about $86 a barrel, they are some 25 percent below their mid-March highs—given the combined effects of weaker global demand prospects, easing concerns about Iran-related geopolitical oil supply risks, and continued above-quota production by the Organization of Petroleum Exporting Countries (OPEC) members.

Global growth weak through 2012

The baseline projections in this WEO Update incorporate weaker growth through much of the second half of 2012 in both advanced and key emerging market economies, reflecting the setbacks to the global recovery discussed above. The near-term forecasts are based on the usual assumption of current policies, with two important qualifications:

  • The projections assume that financial conditions in the euro area periphery will gradually ease through 2013 from the levels reached in June this year, predicated on the assumption that policymakers will follow up on the positive decisions agreed upon at the June EU leaders’ summit and will take action as needed if conditions deteriorate further.
  • The projections also assume that current legislation in the United States, which implies a mandatory sharp reduction in the federal budget deficit—the so-called fiscal cliff—will be modified so as to avoid a large fiscal contraction in the near term.

Overall, global growth is projected to moderate to 3.5 percent in 2012 and 3.9 percent in 2013, some 0.1 and 0.2 percentage point, respectively, lower than forecast in the April 2012 WEO (Table 1). In view of a stronger-than-expected first quarter outcome, weaker global growth in the second half of 2012 will primarily affect annual growth in 2013 through base effects.

Growth in advanced economies is projected to expand by 1.4 percent in 2012 and 1.9 percent in 2013, a downward revision of 0.2 percentage point for 2013 relative to theApril 2012 WEO. The downward revision mostly reflects weaker activity in the euro area, especially in the periphery economies, where the dampening effects from uncertainty and tighter financial conditions will be strongest. Owing mainly to negative spillovers, including from uncertainty, growth in most other advanced economies will also be slightly weaker, although lower oil prices will likely dampen these adverse effects.

Growth in emerging and developing economies will moderate to 5.6 percent in 2012 before picking up to 5.9 percent in 2013, a downward revision of 0.1 and 0.2 percentage point in 2012 and 2013, respectively, relative to the April 2012 WEO. In the near term, activity in many emerging market economies is expected to be supported by the policy easing that began in late 2011 or early 2012 and, in net fuel importers, by lower oil prices, depending on the extent of the pass-through to domestic retail prices (which is often incomplete).

Growth is projected to remain relatively weaker than in 2011 in regions connected more closely with the euro area (Central and Eastern Europe in particular). In contrast with the broad trends, growth in the Middle East and North Africa will be stronger in 2012–13 relative to last year, as key oil exporters continue to boost oil production and domestic demand while activity in Libya is rebounding rapidly after the unrest in 2011. Similarly, growth in sub-Saharan Africa is expected to remain robust in 2012–13, helped by the region’s relative insulation from external financial shocks, and revisions to the growth outlook since the April 2012 WEO are modest.

Global consumer price inflation is projected to ease as demand softens and commodity prices recede. Overall, headline inflation is expected to slip from 4½ percent in the last quarter of 2011 to 3–3½ percent in 2012–13.

The global recovery remains at risk

Downside risks to this weaker global outlook continue to loom large. The most immediate risk is still that delayed or insufficient policy action will further escalate the euro area crisis. In this regard, agreements reached at the EU leaders’ summit are steps in the right direction. But further steps are needed, notwithstanding high implementation hurdles, as underscored by the very recent deterioration in sovereign debt markets. The situation in the euro area crisis economies will likely remain precarious until all policy action needed for a resolution of the crisis has been taken (see below). Other downside risks relate to fiscal policy in other advanced economies:

  • In the short term, the main risk relates to the possibility of excessive fiscal tightening in the United States, given recent political gridlock. In the extreme, if policymakers fail to reach consensus on extending some temporary tax cuts and reversing deep automatic spending cuts, the U.S. structural fiscal deficit could decline by more than 4 percentage points of GDP in 2013. U.S. growth would then stall next year, with significant spillovers to the rest of the world. Moreover, delays in raising the federal debt ceiling could increase risks of financial market disruptions and a loss in consumer and business confidence.
  • Another risk arises from insufficient progress in developing credible plans for medium-term fiscal consolidation in the United States and Japan—the flight to safety in global bond markets currently mitigates this risk. In the absence of policy action, medium-term public debt ratios would continue to move along unsustainable trajectories. As the global recovery advances, a lack of progress could trigger sharply higher sovereign borrowing costs in the United States and Japan as well as turbulence in the global bond and currency markets.

Downside risks to growth in emerging market and developing economies seem primarily related to external factors in the near term. The slowdown in emerging market growth since mid-2011 has been partly the result of policy tightening in response to signs of overheating. But policies have been eased since, and this easing should gain traction in the second half of 2012.

Nevertheless, concerns remain that potential growth in emerging market economies might be lower than expected. Growth in these economies has been above historical trends over the past decade or so, supported in part by financial deepening and rapid credit growth, which may well have generated overly optimistic expectations about potential growth. As a result, growth in emerging market economies could be lower than expected over the medium term, with a correspondingly smaller contribution to global growth. Also of concern are risks to financial stability after years of rapid credit growth in the current environment of weaker global growth, elevated risk aversion, and some signs of domestic strain. Among low-income countries, those dependent on aid face risks of lower-than-expected budget support from advanced economies, while commodity exporters are vulnerable to further erosion of commodity prices. In the medium term, there are tail risks of a hard landing in China, where investment spending could slow more sharply given overcapacity in a number of sectors.

On the positive side, oil price risks have abated in recent months, reflecting the interaction of changes in prospective market conditions and perceived geopolitical risks. Supply conditions have improved due to increased production in Saudi Arabia and other key exporters, while demand prospects have weakened and are subject to downside risks. With geopolitical risks to oil supply widely perceived to have declined, risks to oil price projections appear more evenly balanced now, while those around prices of non-oil commodities tilt downward.

Crisis management remains the top priority

The utmost priority is to resolve the crisis in the euro area. The recent agreements, if implemented in full, will help to break the adverse links between sovereigns and banks and create a banking union. In particular, once the agreed-upon single supervisory mechanism for euro area banks is established, the European Stability Mechanism (ESM) would be able to recapitalize banks directly. Moreover, ESM assistance will not carry seniority status for Spain—an important step to support market confidence. In addition, the leaders re-affirmed a willingness to consider secondary purchases of sovereign bonds by the European Financial Stability Facility (EFSF) and the ESM.

But these measures must be complemented by more progress on banking and fiscal union. In addition, the periphery countries need to remain on track with their policy reform commitments, for which they need a supportive financial and growth environment that must be facilitated by the ECB and other euro-area-level facilities. These tasks require policy measures in several areas:

  • A credible commitment toward a robust and complete monetary union. By setting in motion a process toward a unified supervisory framework, the European summit put in place the first building block of a banking union. But other necessary elements, including a pan-European deposit insurance guarantee scheme and bank resolution mechanism with common backstops, need to be added. In the shorter term, timely implementation will be essential, including through the ratification of the ESM by all members. In addition, these steps would usefully be complemented by plans for fiscal integration, as anticipated in the report of the “Four Presidents” submitted to the summit.
  • The viability of the monetary union must also be supported by wide-ranging structural reforms throughout the euro area to raise growth and resolve intra-area current account imbalances.
  • Demand support and crisis management are essential in the short term to cushion the impact of the region’s adjustment efforts and maintain orderly market conditions (as assumed in the baseline projections).
  • There is room for monetary policy in the euro area to ease further. In addition, the ECB should ensure that its monetary support is transmitted effectively across the region and should continue to provide ample liquidity support to banks under sufficiently lenient conditions. This might require nonstandard measures, such as reactivation of the Securities Market Programme, additional LTROs with lower collateral requirements, or the introduction of QE-style asset purchases.
  • Fiscal consolidation plans in the euro area must be implemented. In general, attention should be paid to meeting structural fiscal targets, rather than nominal targets that will likely be affected by economic conditions. Automatic stabilizers should thus be allowed to operate fully in economies not subject to market pressure. Considering the large downside risks, economies with limited fiscal vulnerability should stand ready to implement fiscal contingency measures if such risks materialize.

In other major advanced economies, monetary policy also needs to respond effectively, including with further unconventional measures, to a much weaker near-term environment that will dampen price pressures. In view of somewhat weaker global growth, automatic stabilizers should be allowed to operate fully, while fiscal consolidation plans might need to be recalibrated if large downside risks materialize (see the July 2012 Fiscal Monitor Update). In the United States, it will be critical to reach transparent, bipartisan agreements to avoid a fiscal cliff in the near term and to raise the federal debt ceiling well ahead of the deadline (which will most likely be early in 2013). At the same time, both the United States and Japan need more credible plans to put medium-term government debt on a downward track. In Japan, a full Diet approval—after passage in the Lower House—of a gradual increase in the consumption tax rate is essential to maintain confidence in the authorities’ resolve to put public debt on a sustainable trajectory.

In emerging and developing economies, policymakers should stand ready to adjust policies, given spillovers from weaker advanced economy prospects and slowing export growth and volatile capital flows. That said, the need for and the nature of the desirable policy response vary considerably across emerging market economies because of differences in their cyclical positions. In some, recent growth declines have primarily reflected normalization to trend, and policies must thus avoid rekindling overheating pressures, with due consideration of risks that potential growth could be lower than expected. However, in economies where inflation and credit pressures have already eased credibly or where inflation expectations remain firmly anchored, further cuts in policy rates could be considered to help alleviate weakening economic conditions. In economies where inflation and credit pressures have not eased significantly, targeted measures could be considered should bank liquidity or funding pressures arise in the context of the current unsettled global financial environment. Economies with sustainable public finances and market financing at sustainable rates should allow automatic stabilizers to play fully, while those with large fiscal and external surpluses could consider fiscal support. Finally, with growth slowing and after many years of rapid credit growth, enhanced risk-based prudential regulation and supervision and macroprudential measures that address financial risks should take top priority.

The global competiteveness review 2012-2013

Global competiteveness review 2013

Pdf format:



Part 1: Measuring Competitiveness 1
1.1 The Global Competitiveness Index 3
2012–2013: Strengthening Recovery by Raising Productivity
by Xavier Sala-i-Martín, Beñat Bilbao-Osorio, Jennifer
Blanke, Roberto Crotti, Margareta Drzeniek Hanouz,
Thierry Geiger, and Caroline Ko
1.2 Assessing the Sustainable Competitiveness 49
of Nations
by Beñat Bilbao-Osorio, Jennifer Blanke, Roberto Crotti,
Margareta Drzeniek Hanouz, Brindusa Fidanza, Thierry
Geiger, Caroline Ko, and Cecilia Serin
1.3 The Executive Opinion Survey: The Voice 69
of the Business Community
by Ciara Browne, Thierry Geiger, and Tania Gutknecht
Part 2: Data Presentation 79
2.1 Country/Economy Profiles 81
How to Read the Country/Economy Profiles …………………………….83
Index of Countries/Economies ………………………………………………..85
Country/Economy Profiles ……………………………………………………..86
2.2 Data Tables 375
How to Read the Data Tables ……………………………………………….377
Index of Data Tables ……………………………………………………………379
Data Tables ……………………………………………………………………….381
Technical Notes and Sources 519
About the Authors 523
Acknowledgments 527