DATA ThisversionoftheWorldEconomicOutlook(weo)isavailableinfullthroughtheImFelIbrary(www.elibrary nf.org)andtheImFwebsite(www.imforg).AccompanyingthepublicationontheImFwebsiteisalargercompila- tion of data from the Weo database than is included in the report itself, including files containing the series most frequently requested by readers. These files may be downloaded for use in a variety of software packages he data appearing in the WEO are compiled by the IMf staff at the time of the WEO exercises. The histori- cal data and projections are based on the information gathered by the IMF country desk officers in the context of their missions to IMF member countries and through their ongoing analysis of the evolving situation in each country. Historical data are updated on a continual basis as more information becomes available, and structural breaks in data are often adjusted to produce smooth series with the use of splicing and other techniques. IMF staff estimates continue to serve as proxies for historical series when complete information is unavailable. As a result, Weo data can differ from those in other sources with official data, including the IMFs International Financial Statistic WEO data and metadata provided are"as is"and"as available, "and every effort is made to ensure their timeliness, accuracy, and completeness, but these cannot be guaranteed. When errors are discovered, there is a concerted effort to correct them as appropriate and feasible. Corrections and revisions made after publication are incorporatedintotheelectroniceditionsavailablefromtheImFeliBrary(www.elibrary.imforg)andontheimF ebsite(www.imf.org).Allsubstantivechangesarelistedindetailintheonlinetablesofcontents For details on the terms and conditions for usage of the WEo database, please refer to the IMF Copyright and Usagewebsite(www.imf.org/external/terms.htm) Inquiries about the content of the WEO and the Weo database should be sent by mail, fax, or online forum (telephone be accepted) World Economic Studies division Research Department International Monetary Fund 700 19th Street, Nw Washington, DC 20431, USA Fax:(202)623-6343 OnlineForum:www.imf.org/weoforum
International Monetary Fund | April 2019 xi This version of the World Economic Outlook (WEO) is available in full through the IMF eLibrary (www.elibrary. imf.org) and the IMF website (www.imf.org). Accompanying the publication on the IMF website is a larger compilation of data from the WEO database than is included in the report itself, including files containing the series most frequently requested by readers. These files may be downloaded for use in a variety of software packages. The data appearing in the WEO are compiled by the IMF staff at the time of the WEO exercises. The historical data and projections are based on the information gathered by the IMF country desk officers in the context of their missions to IMF member countries and through their ongoing analysis of the evolving situation in each country. Historical data are updated on a continual basis as more information becomes available, and structural breaks in data are often adjusted to produce smooth series with the use of splicing and other techniques. IMF staff estimates continue to serve as proxies for historical series when complete information is unavailable. As a result, WEO data can differ from those in other sources with official data, including the IMF’s International Financial Statistics. The WEO data and metadata provided are “as is” and “as available,” and every effort is made to ensure their timeliness, accuracy, and completeness, but these cannot be guaranteed. When errors are discovered, there is a concerted effort to correct them as appropriate and feasible. Corrections and revisions made after publication are incorporated into the electronic editions available from the IMF eLibrary (www.elibrary.imf.org) and on the IMF website (www.imf.org). All substantive changes are listed in detail in the online tables of contents. For details on the terms and conditions for usage of the WEO database, please refer to the IMF Copyright and Usage website (www.imf.org/external/terms.htm). Inquiries about the content of the WEO and the WEO database should be sent by mail, fax, or online forum (telephone inquiries cannot be accepted): World Economic Studies Division Research Department International Monetary Fund 700 19th Street, NW Washington, DC 20431, USA Fax: (202) 623-6343 Online Forum: www.imf.org/weoforum DATA
PREFACE The analysis and projections contained in the World Economic Outlook are integral elements of the IMFs surveillance of economic developments and policies in its member countries, of developments in international financial markets, and of the global economic system. The survey of prospects and policies is the product of a comprehensive interdepartmental review of world economic developments, which draws primarily on information the IMf staff gathers through its consultations with member countries. These consultations are carried out in particular by the IMF's area departments--namely, the African Department, Asia and Pacific Department, European Department, Middle East and Central Asia Department, and Western Hemisphere Department-together with the Strategy, Policy, and Review Department; the Monetary and Capital Markets Department; and the Fiscal Affairs artment The analysis in this report was coordinated in the Research Department under the general direction of Gita Gopinath, Economic Counsellor and Director of Research. The project was directed by Gian Maria Milesi-Ferretti Deputy Director, Research Department and Oya Celasun, Division Chief, Research Department; and Helge Berger, Assistant Director, Research Department and Head of the IMFs Spillover Task Force The primary contributors to this report were Christian Bogmans, Wenjie Chen, Federico Diez, Allan Dizioli, Romain Duval, Johannes Eugster, Benjamin Hunt, Florence Jaumotte, Callum Jones, Toh Kuan, Weicheng Lian, Margaux MacDonald, Akito Matsumoto, Malhar Nabar, Natalija Novta, Andrea Pescatori, Roberto Piazza, Rafael Portillo, Evgenia Pugacheva, Carolina Villegas-Sanchez, Yannick Timmer, and Petia Topalova Other contributors include Michal Andrle, Gavin Asdorian, Carlos Caceres, Luisa Calixto, Diego Cerdeiro, Kyun Suk Chang, Mai Chi Dao, Pankhuri Dutt, Angela Espiritu, Rebecca Eyassu, Jiayue Fan, Chanpheng Fizzarotti, Swarnali Ahmed Hannan, Mandy Hemmati, Ava Yeabin Hong, Christopher Johns, Lama Kiyasseh, Zsoka Koczan Jungjin Lee, Nan Li, Rui Mano, Sergii Meleshchuk, Cynthia Nyanchama Nyakeri, Emory Oakes, Ilse Peirtsegaele Adrian Robles Villamil, Marika Santoro, Susie Xiaohui Sun, Ariana Tayebi, Nicholas Tong, Menexenia Tsaroucha, Shan Wang, Julia Xueliang Wang, Jilun Xing, Yuan Zeng, Qiaoqiao Zhang, Huiyuan Zhao, Caroline Chenqi Zhou, and Jillian Zirnhelt Joseph Procopio from the Communications Department led the editorial team for the report, with production and editorial support from Christine Ebrahimzadeh, and editorial assistance from James Unwin, Lucy Scott Morales, and Vector Talent Resources he analysis has benefited from comments and suggestions by staff members from other IMF departments, as well as by Executive Directors following their discussion of the report on March 21, 2019. However, both projections and policy considerations are those of the IMF staff and should not be attributed to Executive Directors or to their national authorities International Monetary Fund April 2019
xii International Monetary Fund | April 2019 The analysis and projections contained in the World Economic Outlook are integral elements of the IMF’s surveillance of economic developments and policies in its member countries, of developments in international financial markets, and of the global economic system. The survey of prospects and policies is the product of a comprehensive interdepartmental review of world economic developments, which draws primarily on information the IMF staff gathers through its consultations with member countries. These consultations are carried out in particular by the IMF’s area departments—namely, the African Department, Asia and Pacific Department, European Department, Middle East and Central Asia Department, and Western Hemisphere Department—together with the Strategy, Policy, and Review Department; the Monetary and Capital Markets Department; and the Fiscal Affairs Department. The analysis in this report was coordinated in the Research Department under the general direction of Gita Gopinath, Economic Counsellor and Director of Research. The project was directed by Gian Maria Milesi-Ferretti, Deputy Director, Research Department and Oya Celasun, Division Chief, Research Department; and Helge Berger, Assistant Director, Research Department and Head of the IMF’s Spillover Task Force. The primary contributors to this report were Christian Bogmans, Wenjie Chen, Federico Diez, Allan Dizioli, Romain Duval, Johannes Eugster, Benjamin Hunt, Florence Jaumotte, Callum Jones, Toh Kuan, Weicheng Lian, Margaux MacDonald, Akito Matsumoto, Malhar Nabar, Natalija Novta, Andrea Pescatori, Roberto Piazza, Rafael Portillo, Evgenia Pugacheva, Carolina Villegas-Sánchez, Yannick Timmer, and Petia Topalova. Other contributors include Michal Andrle, Gavin Asdorian, Carlos Caceres, Luisa Calixto, Diego Cerdeiro, Kyun Suk Chang, Mai Chi Dao, Pankhuri Dutt, Angela Espiritu, Rebecca Eyassu, Jiayue Fan, Chanpheng Fizzarotti, Swarnali Ahmed Hannan, Mandy Hemmati, Ava Yeabin Hong, Christopher Johns, Lama Kiyasseh, Zsóka Kóczán, Jungjin Lee, Nan Li, Rui Mano, Sergii Meleshchuk, Cynthia Nyanchama Nyakeri, Emory Oakes, Ilse Peirtsegaele, Adrian Robles Villamil, Marika Santoro, Susie Xiaohui Sun, Ariana Tayebi, Nicholas Tong, Menexenia Tsaroucha, Shan Wang, Julia Xueliang Wang, Jilun Xing, Yuan Zeng, Qiaoqiao Zhang, Huiyuan Zhao, Caroline Chenqi Zhou, and Jillian Zirnhelt. Joseph Procopio from the Communications Department led the editorial team for the report, with production and editorial support from Christine Ebrahimzadeh, and editorial assistance from James Unwin, Lucy Scott Morales, and Vector Talent Resources. The analysis has benefited from comments and suggestions by staff members from other IMF departments, as well as by Executive Directors following their discussion of the report on March 21, 2019. However, both projections and policy considerations are those of the IMF staff and should not be attributed to Executive Directors or to their national authorities. PREFACE
FOREWORD ne year ago economic activity was accel in financial markets has been rapid, those in the real erating in almost all regions of the world economy have yet to materialize. Measures of indus- and the global economy was projected to trial production and investment remain weak for mos grow at 3.9 percent in 2018 and 2019 advanced and emerging economies, and global trade One year later, much has changed: the escalation of has yet to recover S-China trade tensions, macroeconomic stress in With improvements expected in the second half of Argentina and Turkey, disruptions to the auto sector 2019, global economic growth in 2020 is projected to in Germany, tighter credit policies in China, and return to 3.6 percent. This return is predicated on a financial tightening alongside the normalization of rebound in Argentina and Turkey and some improve monetary policy in the larger advanc economies ment in a set of other stressed emerging market and have all contributed to a significantly weakened developing economies, and therefore subject to con- global expansion, especially in the second half of siderable uncertainty. Beyond 2020 growth will stabi- 2018. With this weakness expected to persist into lize at around 37 percent, bolstered mainly by gro the first half of 2019, the World Economic Outlook in China and India and their increasing weights in (WEO) projects a decline in growth in 2019 for 70 world income. Growth in advanced economies wi percent of the global economy. Global growth, which ontinue to slow gradually as the impact of US fiscal peaked at close to 4 percent in 2017, softened to 3 stimulus fades and growth tends toward the modest percent in 2018, and is projected to decline further atial for the group, given ageing to 3.3 percent in 2019. Although a 3. 3 percent productivity growth. Growth in emerging market exPansion is still reasonable, the outlook for and developing economies will stabilize at around 5 many countries is very challenging, with considerable percent, though with considerable variance between uncertainties in the short term, especially as advanced countries as subdued commodity prices and civil strife economy growth rates converge toward their modest weaken prospects for some ong-term potential. While the overall outlook remains benign, there While 2019 started out on a weak ooting, a are many downside risks. There is an uneasy truce on is expected in the second half of the year. This pickup de policy, as tensions could fare up again and play is supported by significant policy accommodation by out in other areas(such as the auto industry)with major economies, made possible by the absence of large disruptions to global supply chains. Growth in inflationary pressures despite closing output gaps. The China may surprise on the downside, and the risks US Federal Reserve, in response to rising global risks, surrounding Brexit remain heightened. In the face paused interest rate increases and signaled no increases of significant financial vulnerabilities associated with for the rest of the year. The European Central Bank, large private and public sector debt in several coun- the Bank of Japan, and the Bank of England have all tries, including sovereign- bank doom loop risks( for shifted to a more accommodative stance. China has example, in Italy), there could be a rapid change in ramped up its fiscal and monetary stimulus to counter financial conditions owing to, for example, a risk-off the negative effect of trade tariffs. Furthermore, the episode or a no-deal Breit. outlook for US-China trade tensions has improved as With weak expansion projected for importal the prospects of a trade agreement take shape. parts of the world, a realization of these downside These policy responses have helped reverse the risks could dramatically worsen the outlook. This ightening of financial conditions to varying degrees would take place at a time when conventional mon- across countries. Emerging markets have experienced etary and fiscal space is limited as a policy response a resumption in portfolio flows, a decline in sovereign It is therefore imperative that costly policy mistakes borrowing costs, and a strengthening of their cur- are avoided. Policymakers need to work cooperatively rencies relative to the dollar. While the improvement to help ensure that policy uncertainty doesnt weaken
One year ago economic activity was accelerating in almost all regions of the world and the global economy was projected to grow at 3.9 percent in 2018 and 2019. One year later, much has changed: the escalation of US–China trade tensions, macroeconomic stress in Argentina and Turkey, disruptions to the auto sector in Germany, tighter credit policies in China, and financial tightening alongside the normalization of monetary policy in the larger advanced economies have all contributed to a significantly weakened global expansion, especially in the second half of 2018. With this weakness expected to persist into the first half of 2019, the World Economic Outlook (WEO) projects a decline in growth in 2019 for 70 percent of the global economy. Global growth, which peaked at close to 4 percent in 2017, softened to 3.6 percent in 2018, and is projected to decline further to 3.3 percent in 2019. Although a 3.3 percent global expansion is still reasonable, the outlook for many countries is very challenging, with considerable uncertainties in the short term, especially as advanced economy growth rates converge toward their modest long-term potential. While 2019 started out on a weak footing, a pickup is expected in the second half of the year. This pickup is supported by significant policy accommodation by major economies, made possible by the absence of inflationary pressures despite closing output gaps. The US Federal Reserve, in response to rising global risks, paused interest rate increases and signaled no increases for the rest of the year. The European Central Bank, the Bank of Japan, and the Bank of England have all shifted to a more accommodative stance. China has ramped up its fiscal and monetary stimulus to counter the negative effect of trade tariffs. Furthermore, the outlook for US–China trade tensions has improved as the prospects of a trade agreement take shape. These policy responses have helped reverse the tightening of financial conditions to varying degrees across countries. Emerging markets have experienced a resumption in portfolio flows, a decline in sovereign borrowing costs, and a strengthening of their currencies relative to the dollar. While the improvement in financial markets has been rapid, those in the real economy have yet to materialize. Measures of industrial production and investment remain weak for most advanced and emerging economies, and global trade has yet to recover. With improvements expected in the second half of 2019, global economic growth in 2020 is projected to return to 3.6 percent. This return is predicated on a rebound in Argentina and Turkey and some improvement in a set of other stressed emerging market and developing economies, and therefore subject to considerable uncertainty. Beyond 2020 growth will stabilize at around 3½ percent, bolstered mainly by growth in China and India and their increasing weights in world income. Growth in advanced economies will continue to slow gradually as the impact of US fiscal stimulus fades and growth tends toward the modest potential for the group, given ageing trends and low productivity growth. Growth in emerging market and developing economies will stabilize at around 5 percent, though with considerable variance between countries as subdued commodity prices and civil strife weaken prospects for some. While the overall outlook remains benign, there are many downside risks. There is an uneasy truce on trade policy, as tensions could flare up again and play out in other areas (such as the auto industry) with large disruptions to global supply chains. Growth in China may surprise on the downside, and the risks surrounding Brexit remain heightened. In the face of significant financial vulnerabilities associated with large private and public sector debt in several countries, including sovereign-bank doom loop risks (for example, in Italy), there could be a rapid change in financial conditions owing to, for example, a risk-off episode or a no-deal Brexit. With weak expansion projected for important parts of the world, a realization of these downside risks could dramatically worsen the outlook. This would take place at a time when conventional monetary and fiscal space is limited as a policy response. It is therefore imperative that costly policy mistakes are avoided. Policymakers need to work cooperatively to help ensure that policy uncertainty doesn’t weaken FOREWORD International Monetary Fund | April 2019 xiii
WORLD ECONOMIC OUTLOOK: GROWTH SLOWDOWN, PRECARIOUS RECOVERY Ivestment. Fiscal policy will need to manage the relative price of machinery and equipment has trade-offs between supporting demand and ensur- fallen in all countries, driven both by higher pro- ing that public debt remains on a sustainable path, ductivity in the capital-goods-producing sector and and the optin InIx W ill depend on country-specific increased trade integration. This decline has supported circumstances. Financial sector policies must address the rise in real investment rates in machinery and vulnerabilities proactively by deploying macropru equipment, benefiting developing countries. Rising dential tools. Low-income commodity exporters trade tensions could reverse these price declines and should diversify away from commodities damage investment at a time when investment is subdued outlook for commodity prices. Monetary already weak, which only further emphasizes the need policy should remain data dependent, be well com- to quickly resolve trade disagreements municated and ensure that infation expectation The final chapter of the WEO examines the link remain anchored between bilateral trade tariffs and trade imbalances cross all economies, the imperative is to take US-China trade frictions have brought a focus on th actions that boost potential output, improve inclu question of whether bilateral trade imbalances can(or siveness,and strengthen resilience. A social dialogue should) be addressed using bilateral trade measures across all stakeholders to address inequality and This chapter demonstrates that the link between the political discontent will benefit economies. There is two is precarious. Bilateral trade balances since the a need for greater multilateral cooperation to resolve mid-1990s have reflected mostly aggregate macro- trade conficts, to address climate change and risks economic forces known to determine aggregate trade from cybersecurity, and to improve the effectiveness of balances at the country level and have had much less international taxation to do with bilateral tariffs. Targeting bilateral trade This issue of the WEO also tackles three majc balances will likely only lead to trade diversion, with developments that need to be addressed to enhance limited impact on country-level balances. The findings long-term growth. The first is rising inequality, the of this chapter help explain why, despite the tariff second is weak investment, and the third is rising measures, the US trade deficit is the largest it has been protectionism in trade. Chapter 2 investigates the since 2008. The chapter also establishes that the nega evolution of corporate market power(as measured tive impact of tariffs on output is significantly higher by markups) and its ability to explain several macro today than in 1995 owing to the bigger role of global phenomena, including weak investment and the supply chains in world trade. declining labor shares that help fuel inequality. The This is a delicate year for the global economy. If the finding is that the aggregate increase in markups downside risks do not materialize and the policy sup- since 2000 has been modest and, consequently, the port put in place is effective, then global growth will implications for the macroeconomy relatively modest. return to 3.6 percent in 2020. If, however, any of the There is, however, significant heterogeneity, with the major risks materialize, then the expected recoveries aggregate increase driven mainly by a more substantial in stressed economies, export-dependent economies, increase in markups by a small number of firms that and highly indebted economies may not occur. In are the more productive and innovative firms.The that case, policymakers increase in aggregate market power therefore appears g on circumstances, this may require synchronized, to be, as of now, less a phenomenon of poor competi- country-specific policy stimulus across econd tion and more one of winner-takes-most dynamics complemented by accommodative monetary policy where markups compensate in part for investment Synchronization can make fiscal stimulus more effec in intangible assets. However, going forward this tive through signaling effects that raise household and market dominance could lead to unfair advantages business confidence, and through the mitigation of that weaken market entry and competition and, m leakages via imports. Finally, adequate resources for multilateral institutions remain essential to retain an is therefore important to cut barriers to market entry effective global safety net, which would help stabilize and reform and strengthen competition law to better align with the new economy. Chapter 3 highlights the benefits for investment of Gita Gopinath reducing trade barriers. Over the past three decades International Monetary Fund April 2019
WORLD ECONOMIC OUTLOOK: GROWTH SLOWDOWN, PRECARIOUS RECOVERY investment. Fiscal policy will need to manage trade-offs between supporting demand and ensuring that public debt remains on a sustainable path, and the optimal mix will depend on country-specific circumstances. Financial sector policies must address vulnerabilities proactively by deploying macroprudential tools. Low-income commodity exporters should diversify away from commodities given the subdued outlook for commodity prices. Monetary policy should remain data dependent, be well communicated, and ensure that inflation expectations remain anchored. Across all economies, the imperative is to take actions that boost potential output, improve inclusiveness, and strengthen resilience. A social dialogue across all stakeholders to address inequality and political discontent will benefit economies. There is a need for greater multilateral cooperation to resolve trade conflicts, to address climate change and risks from cybersecurity, and to improve the effectiveness of international taxation. This issue of the WEO also tackles three major developments that need to be addressed to enhance long-term growth. The first is rising inequality, the second is weak investment, and the third is rising protectionism in trade. Chapter 2 investigates the evolution of corporate market power (as measured by markups) and its ability to explain several macro phenomena, including weak investment and the declining labor shares that help fuel inequality. The finding is that the aggregate increase in markups since 2000 has been modest and, consequently, the implications for the macroeconomy relatively modest. There is, however, significant heterogeneity, with the aggregate increase driven mainly by a more substantial increase in markups by a small number of firms that are the more productive and innovative firms. The increase in aggregate market power therefore appears to be, as of now, less a phenomenon of poor competition and more one of winner-takes-most dynamics, where markups compensate in part for investment in intangible assets. However, going forward this market dominance could lead to unfair advantages that weaken market entry and competition and, more significantly, dampen investment and innovation. It is therefore important to cut barriers to market entry and reform and strengthen competition law to better align with the new economy. Chapter 3 highlights the benefits for investment of reducing trade barriers. Over the past three decades, the relative price of machinery and equipment has fallen in all countries, driven both by higher productivity in the capital-goods-producing sector and increased trade integration. This decline has supported the rise in real investment rates in machinery and equipment, benefiting developing countries. Rising trade tensions could reverse these price declines and damage investment at a time when investment is already weak, which only further emphasizes the need to quickly resolve trade disagreements. The final chapter of the WEO examines the link between bilateral trade tariffs and trade imbalances. US–China trade frictions have brought a focus on the question of whether bilateral trade imbalances can (or should) be addressed using bilateral trade measures. This chapter demonstrates that the link between the two is precarious. Bilateral trade balances since the mid-1990s have reflected mostly aggregate macroeconomic forces known to determine aggregate trade balances at the country level and have had much less to do with bilateral tariffs. Targeting bilateral trade balances will likely only lead to trade diversion, with limited impact on country-level balances. The findings of this chapter help explain why, despite the tariff measures, the US trade deficit is the largest it has been since 2008. The chapter also establishes that the negative impact of tariffs on output is significantly higher today than in 1995 owing to the bigger role of global supply chains in world trade. This is a delicate year for the global economy. If the downside risks do not materialize and the policy support put in place is effective, then global growth will return to 3.6 percent in 2020. If, however, any of the major risks materialize, then the expected recoveries in stressed economies, export-dependent economies, and highly indebted economies may not occur. In that case, policymakers will need to adjust. Depending on circumstances, this may require synchronized, country-specific policy stimulus across economies, complemented by accommodative monetary policy. Synchronization can make fiscal stimulus more effective through signaling effects that raise household and business confidence, and through the mitigation of leakages via imports. Finally, adequate resources for multilateral institutions remain essential to retain an effective global safety net, which would help stabilize the global economy. Gita Gopinath Economic Counsellor xiv International Monetary Fund | April 2019
EXECUTIVE SUMMARY A Weakening Expansion igure 1. Half-Yearly Growth Rates (Annualized semiannual percent change) After strong growth in 2017 and early 2018, global activity slowed notably in the second half Global growth is expected to level off in the first half of 2019 and firm up after that. of last year, reflecting a confluence of factors affecting major economies. China's growth declined following a combination of needed regulatory tightening to rein shadow banking and an increase in trade tensions with the United States. The euro area economy lost more momentum than expected as consumer and business confidence weakened and car production in any was disrupted by the introduction of new emission standards; investment dropped in Italy as sovereign spreads widened; and external demand specially from emerging Asia, softened. Elsewhere natural disasters hurt activity in Japan. Trade tensions increasingly took a toll on business confidence and, so, Advanced economies financial market sentiment worsened, with financial Emerging market and developing economIes conditions tightening for vulnerable emerging markets World in the spring of 2018 and then in advanced economies 17:H1 H1 19:H1 later in the year, weighing on global demand. Condi- tions have eased in 2019 as the US Federal Reserve Source: IMF staff estimates signaled a more accommodative monetary policy stance and markets became more optimistic about a US-China trade deal, but they remain slightly more ket sentiment, the waning of some temporary drags restrictive than in the fall on growth in the euro area, and a gradual stabilization of conditions in stressed emerging market economies, Global Growth Is Set to Moderate in the cluding Argentina and Turkey. Improved momen- Near Term, Then Pick Up Modestly tum for emerging market and developing economies is projected to continue into 2020, primarily reflecting As a result of these developments, global growth is developments in economies currently experiencing now projected to slow from 3.6 percent in 2018to macroeconomic distress-a forecast subject to notable 3.3 percent in 2019, before returning to 3. 6 percent By dvanced in 2020. Growth for 2018 was revised down by 0.1 mies is projected to continue to slow gradually as the percentage point relative to the October 2018 World impact of US fiscal stimulus fades and growth tends Economic Outlook (WEO), reflecting weakness in the toward the modest potential for the group econd half of the year, and the forecasts for 2019 and Beyond 2020, global growth is set to pla 2020 are now marked down by 0. 4 percentage point about 3. 6 percent over the medium term, sustained and 0.1 percentage point, respectively. The current by the increase in the relative size of economies, such forecast envisages that global growth will level off in as those of China and India, which are projected to the first half of 2019 and firm up after that(Figure have robust growth by comparison to slower-growing 1). The projected pickup in the second half of 2019 is advanced and emerging market economies(even predicated on an ongoing buildup of policy stimulus though Chinese growth will eventually moderate). As in China, recent improvements in global financial mar- noted in previous WEO reports, tepid labor produc-
A Weakening Expansion After strong growth in 2017 and early 2018, global economic activity slowed notably in the second half of last year, reflecting a confluence of factors affecting major economies. China’s growth declined following a combination of needed regulatory tightening to rein in shadow banking and an increase in trade tensions with the United States. The euro area economy lost more momentum than expected as consumer and business confidence weakened and car production in Germany was disrupted by the introduction of new emission standards; investment dropped in Italy as sovereign spreads widened; and external demand, especially from emerging Asia, softened. Elsewhere, natural disasters hurt activity in Japan. Trade tensions increasingly took a toll on business confidence and, so, financial market sentiment worsened, with financial conditions tightening for vulnerable emerging markets in the spring of 2018 and then in advanced economies later in the year, weighing on global demand. Conditions have eased in 2019 as the US Federal Reserve signaled a more accommodative monetary policy stance and markets became more optimistic about a US–China trade deal, but they remain slightly more restrictive than in the fall. Global Growth Is Set to Moderate in the Near Term, Then Pick Up Modestly As a result of these developments, global growth is now projected to slow from 3.6 percent in 2018 to 3.3 percent in 2019, before returning to 3.6 percent in 2020. Growth for 2018 was revised down by 0.1 percentage point relative to the October 2018 World Economic Outlook (WEO), reflecting weakness in the second half of the year, and the forecasts for 2019 and 2020 are now marked down by 0.4 percentage point and 0.1 percentage point, respectively. The current forecast envisages that global growth will level off in the first half of 2019 and firm up after that (Figure 1). The projected pickup in the second half of 2019 is predicated on an ongoing buildup of policy stimulus in China, recent improvements in global financial market sentiment, the waning of some temporary drags on growth in the euro area, and a gradual stabilization of conditions in stressed emerging market economies, including Argentina and Turkey. Improved momentum for emerging market and developing economies is projected to continue into 2020, primarily reflecting developments in economies currently experiencing macroeconomic distress—a forecast subject to notable uncertainty. By contrast, activity in advanced economies is projected to continue to slow gradually as the impact of US fiscal stimulus fades and growth tends toward the modest potential for the group. Beyond 2020, global growth is set to plateau at about 3.6 percent over the medium term, sustained by the increase in the relative size of economies, such as those of China and India, which are projected to have robust growth by comparison to slower-growing advanced and emerging market economies (even though Chinese growth will eventually moderate). As noted in previous WEO reports, tepid labor producEXECUTIVE SUMMARY Advanced economies Emerging market and developing economies World Figure 1. Half-Yearly Growth Rates (Annualized semiannual percent change) Global growth is expected to level off in the first half of 2019 and firm up after that. 2016:H1 17:H1 18:H1 19:H1 20:H2 0 1 2 3 4 5 6 Source: IMF staff estimates. International Monetary Fund | April 2019 xv