WORLD ECONOMIC OUTLOOK: GROWTH SLOWDOWN, PRECARIOUS RECOVERY tivity growth and slowing expansion of the labor force global growth slowdown; and prolonged fiscal amid population aging will drag advanced economy uncertainty and elevated yields in italy--particularly growth lower over the projection horizon. if coupled with a deeper recession-with possible Growth across emerging market and developing adverse spillovers for other euro area economies. A conomies is projected to stabilize slightly below 5 rapid reassessment by markets of the monetary policy percent, though with variations by region and coun- stance in the United States could also tighten global try.The baseline outlook for emerging Asia remains financial conditions. Over the medium term, climate favorable, with Chinas growth projected to slow hange and political discord in the context of rising gradually toward sustainable levels and convergence in inequality are key risks that could lower global poter frontier economies toward higher income levels. For tial output, with particularly severe other regions,the outlook is complicated by a com- some vulnerable countries bination of structural bottlenecks. slower advanced economy growth and, in some cases, high debt and tighter financial conditions. These factors, alongside Policy Priorities subdued commodity prices and civil strife or conffict Amid waning global growth momentum and limited in some cases, contribute to subdued medium-term policy space to combat downturns, avoiding policy prospects for Latin America; the Middle East, North missteps that could harm economic activity needs to be Africa, and Pakistan region; and parts of sub-Saharan the main priority. Macroeconomic and financial policy Africa. In particular, convergence prospects are bleak should aim to prevent further deceleration where for some 41 emerging market and developing econo- output could fall below potential and facilitate a soft mies, accounting for close to 10 percent of global landing where policy support GDP in purchasing-power-parity terms and with At the national level, this requires monetary policy total population close to 1 billion, where per capita to ensure that inflation remains on track toward the Incomes are projected to fall further behind those entral banks target(or if it is close to target, that it advanced economies over the next five years. abilizes there)and that inflation expectations remain anchored. It requires fiscal policy to manage trade- Risks are tilted to the downside offs between supporting demand and making sure that public debt stays on a sustainable path. Where While global growth could surprise favorably if fiscal consolidation is needed and monetary policy is trade differences are resolved quickly so that busi- trained, its pace should be calibrated ness confidence rebounds and investor sentiment stability while avoiding harming near-term growt strengthens further, the balance of risks to the outlook and depleting programs that protect the vulnerable. If remains on the downside. a further escalation of trade the current slowdown turns out to be more severe and tensions and the associated increases in policy uncer- protracted than expected in the baseline, macroeco- tainty could further weaken growth. The potential nomic policies should become more accommodative, remains for sharp deterioration in market sentiment, particularly where output remains below potential and which would imply portfolio reallocations away from financial stability is not at risk. Across all economies, risk assets, wider spreads over safe haven securities, the imperative is to take actions that boost potential and generally tighter financial conditions, especially output growth, improve inclusiveness, and strengthen for vulnerable economies. Possible triggers for such esilience. at the multilateral level, the m an episode include a no-deal Brexit withdrawal of the is for countries to resolve trade disagreements coopera United Kingdom from the European Union; persis- tively, without raising distortionary barriers that would tently weak economic data pointing to a protracted further destabilize a slowing global economy. International Monetary Fund April 2019
WORLD ECONOMIC OUTLOOK: GROWTH SLOWDOWN, PRECARIOUS RECOVERY tivity growth and slowing expansion of the labor force amid population aging will drag advanced economy growth lower over the projection horizon. Growth across emerging market and developing economies is projected to stabilize slightly below 5 percent, though with variations by region and country. The baseline outlook for emerging Asia remains favorable, with China’s growth projected to slow gradually toward sustainable levels and convergence in frontier economies toward higher income levels. For other regions, the outlook is complicated by a combination of structural bottlenecks, slower advanced economy growth and, in some cases, high debt and tighter financial conditions. These factors, alongside subdued commodity prices and civil strife or conflict in some cases, contribute to subdued medium-term prospects for Latin America; the Middle East, North Africa, and Pakistan region; and parts of sub-Saharan Africa. In particular, convergence prospects are bleak for some 41 emerging market and developing economies, accounting for close to 10 percent of global GDP in purchasing-power-parity terms and with total population close to 1 billion, where per capita incomes are projected to fall further behind those in advanced economies over the next five years. Risks Are Tilted to the Downside While global growth could surprise favorably if trade differences are resolved quickly so that business confidence rebounds and investor sentiment strengthens further, the balance of risks to the outlook remains on the downside. A further escalation of trade tensions and the associated increases in policy uncertainty could further weaken growth. The potential remains for sharp deterioration in market sentiment, which would imply portfolio reallocations away from risk assets, wider spreads over safe haven securities, and generally tighter financial conditions, especially for vulnerable economies. Possible triggers for such an episode include a no-deal Brexit withdrawal of the United Kingdom from the European Union; persistently weak economic data pointing to a protracted global growth slowdown; and prolonged fiscal uncertainty and elevated yields in Italy—particularly if coupled with a deeper recession—with possible adverse spillovers for other euro area economies. A rapid reassessment by markets of the monetary policy stance in the United States could also tighten global financial conditions. Over the medium term, climate change and political discord in the context of rising inequality are key risks that could lower global potential output, with particularly severe implications for some vulnerable countries. Policy Priorities Amid waning global growth momentum and limited policy space to combat downturns, avoiding policy missteps that could harm economic activity needs to be the main priority. Macroeconomic and financial policy should aim to prevent further deceleration where output could fall below potential and facilitate a soft landing where policy support needs to be withdrawn. At the national level, this requires monetary policy to ensure that inflation remains on track toward the central bank’s target (or if it is close to target, that it stabilizes there) and that inflation expectations remain anchored. It requires fiscal policy to manage tradeoffs between supporting demand and making sure that public debt stays on a sustainable path. Where fiscal consolidation is needed and monetary policy is constrained, its pace should be calibrated to secure stability while avoiding harming near-term growth and depleting programs that protect the vulnerable. If the current slowdown turns out to be more severe and protracted than expected in the baseline, macroeconomic policies should become more accommodative, particularly where output remains below potential and financial stability is not at risk. Across all economies, the imperative is to take actions that boost potential output growth, improve inclusiveness, and strengthen resilience. At the multilateral level, the main priority is for countries to resolve trade disagreements cooperatively, without raising distortionary barriers that would further destabilize a slowing global economy. xvi International Monetary Fund | April 2019
GLOBAL PROSPECTS AND POLICIES Recent Developments Advanced economies Global Expansion Loses Steam The euro area slowed more than expected as a com- Following a broad-based upswing in cyclical growth bination of factors weighed on activity across coun hat lasted nearly two years, the global economic tries, including(1)weakening consumer and business expansion decelerated in the second half of 2018 sentiment;(2)delays associated with the introduction Activity softened amid an increase in trade tensions of new fuel emission standards for diesel-powered nd tariff hikes between the United States and China, vehicles in Germany; (3)fiscal policy uncertainty, a decline in business confidence, a tightening of elevated sovereign spreads, and softening investment financial conditions, and higher policy uncertainty n Italy; and(4)street protests that disrupted retail across many economies. Against this global backdrop, sales and weighed on consumption spending in France a combination of co ific facto Growing concerns about a no-deal Brexit also likely further reduced momentum. After peaking at close to weighed on investment spending within the euro area 4 percent in 2017, global growth remained strong, Following a notable uptick in 2017, euro area econ- 3.8 percent in the first half of 2018, but dropped omies exports softened considerably, in part because 3. 2 percent in the second half of the year. of weak intra-euro-area trade, which exacerbated poor sentiment across the currency area. Emerging Market and Developing Economies Elsewhere in advanced economies, activity weakened in Japan, largely due to natural disasters in the third quarter. In China, necessary domestic regulatory tightening to One exception to the broader pattern was that momen- rein in debt, constrain shadow financial intermediation, tum in the United States remained robust amid a tight and place growth on a sustainable footing contribute labor market and growth, but invest to slower domestic investment, particularly in infrastruc- ment appeared to soften in the second half of the year ture. Spending on durable consumption goods also soft A common influence on sentiment across advanced ened, with automobile sales declining in 2018 following and emerging market and developing economies has beer the expiration of incentive programs for car purchases igh policy uncertainty in the wake of policy actions and These developments contributed to slower momentum difficulties in reaching agreement on contentious issues. over the year, with further pressure from diminishing The extended truce in the US-China trade dispute has export orders as US tariff actions began to take hold in provided a welcome respite in an otherwise turbulent the second half of the year. As a result, Chinas growth policy backdrop that included Brexit negotiations, discus- declined from 6.8 percent in the first half of 2018 to sions over the Italian budget, changes in Mexican policy 6.0 percent in the second half of the year. The resulting direction under the new administration, the US federal weakening in import demand appeared to have impacts government shutdown, and US policy on Iran. Elsewhere across emerging market economies, acti Softening Industrial Production, Slower Trade ity moderated as worsening global financial market Amid high policy uncertainty and weakening prosped sentiment in the second half of 2018 compounded for global demand, industrial production decelerated country-specific factors Needed policy tightening to Figure 1. 1), particularly for capital goods. The slowdown reduce financial and macroeconomic imbalances took was broad based, notably across advanced economies, ffect in Argentina and Turkey, sentiment weakened except the United States. While a cyclical slowdown in ads rose in mexico following the countries thought to be above potential was incoming administrations cancellation of a planned to be expected, the downturn was larger and appeared airport for the capital and backtracking on energy and related to a souring of market sentiment, in part because ducation reforms; and geopolitical of trade tensions. Global trade growth has slowed sharply uted to weaker activity in the Middle east from its peak in late 2017, with US imports from China International Monetary Fund April 2019
International Monetary Fund | April 2019 1 Recent Developments: Global Expansion Loses Steam Following a broad-based upswing in cyclical growth that lasted nearly two years, the global economic expansion decelerated in the second half of 2018. Activity softened amid an increase in trade tensions and tariff hikes between the United States and China, a decline in business confidence, a tightening of financial conditions, and higher policy uncertainty across many economies. Against this global backdrop, a combination of country- and sector-specific factors further reduced momentum. After peaking at close to 4 percent in 2017, global growth remained strong, at 3.8 percent in the first half of 2018, but dropped to 3.2 percent in the second half of the year. Emerging Market and Developing Economies In China, necessary domestic regulatory tightening to rein in debt, constrain shadow financial intermediation, and place growth on a sustainable footing contributed to slower domestic investment, particularly in infrastructure. Spending on durable consumption goods also softened, with automobile sales declining in 2018 following the expiration of incentive programs for car purchases. These developments contributed to slower momentum over the year, with further pressure from diminishing export orders as US tariff actions began to take hold in the second half of the year. As a result, China’s growth declined from 6.8 percent in the first half of 2018 to 6.0 percent in the second half of the year. The resulting weakening in import demand appeared to have impacts on trading partner exports in Asia and Europe. Elsewhere across emerging market economies, activity moderated as worsening global financial market sentiment in the second half of 2018 compounded country-specific factors. Needed policy tightening to reduce financial and macroeconomic imbalances took effect in Argentina and Turkey; sentiment weakened and sovereign spreads rose in Mexico, following the incoming administration’s cancellation of a planned airport for the capital and backtracking on energy and education reforms; and geopolitical tensions contributed to weaker activity in the Middle East. Advanced Economies The euro area slowed more than expected as a combination of factors weighed on activity across countries, including (1) weakening consumer and business sentiment; (2) delays associated with the introduction of new fuel emission standards for diesel-powered vehicles in Germany; (3) fiscal policy uncertainty, elevated sovereign spreads, and softening investment in Italy; and (4) street protests that disrupted retail sales and weighed on consumption spending in France. Growing concerns about a no-deal Brexit also likely weighed on investment spending within the euro area. Following a notable uptick in 2017, euro area economies’ exports softened considerably, in part because of weak intra-euro-area trade, which exacerbated poor sentiment across the currency area. Elsewhere in advanced economies, activity weakened in Japan, largely due to natural disasters in the third quarter. One exception to the broader pattern was that momentum in the United States remained robust amid a tight labor market and strong consumption growth, but investment appeared to soften in the second half of the year. A common influence on sentiment across advanced and emerging market and developing economies has been high policy uncertainty in the wake of policy actions and difficulties in reaching agreement on contentious issues. The extended truce in the US–China trade dispute has provided a welcome respite in an otherwise turbulent policy backdrop that included Brexit negotiations, discussions over the Italian budget, changes in Mexican policy direction under the new administration, the US federal government shutdown, and US policy on Iran. Softening Industrial Production, Slower Trade Amid high policy uncertainty and weakening prospects for global demand, industrial production decelerated (Figure 1.1), particularly for capital goods. The slowdown was broad based, notably across advanced economies, except the United States. While a cyclical slowdown in countries thought to be operating above potential was to be expected, the downturn was larger and appeared related to a souring of market sentiment, in part because of trade tensions. Global trade growth has slowed sharply from its peak in late 2017, with US imports from China CHAPTER 1 GLOBAL PROSPECTS AND POLICIES
WORLD ECONOMIC OUTLOOK: GROWTH SLOWDOWN, PRECARIOUS RECOVERY 1.1. Global Activity Indicators Figure 1.2. Trade Indicators month moving average; year-over-year percent change, unless (Year-over-year percent change) Global trade growth has slowed sharply from its peak in late 2017. Following Indicators of global activity have generally softened since the second half of 2018. some front-loading, US imports from China subject to new US tariffs declined or stalled toward the end of the year. (Deviations from 50 for Manufacturing PMI) 15-1. Real Exports es United Kingdom 5-— World trade volumes Manufacturing PMI: new orders 5 210 2015 2015 19 10-2. Industrial Production 7.5 50-2. US Imports from United states China(right scale 7 30 5 2 -6.510 0- S34bn effective S200bn 10% effective 2015 Mar 2018 112-3. Consumer Confidence Source: IMF staff calculations 110 he vertical bars correspond to the ti 个 announced June 15, 2018: S34bn effectiv list) July 6, 2018, and S16bn effective(of S50bn list) August 23, 2018; S Jy10,2018 with 10 percent tariff on $200bn effective 4. 2018. The series show the evolution of US imports of goods in the various tariff lists bn= billion. subject to new US tariffs declining or stalling toward of tariff hikes; Figure 1. 2 ). Weak expectata the end of the year(following some front-loading ahea 19 activity seen in purchasing managers indexes point to a continuation of the slow momentum this year. ic Policy Analysis; Haver Analytics: markit Economics: and IMF staff calculations. Lower Commodity Prices, Subdued Inflation Pressure confidence: PMI=purchasing managers'index Euro area 4 comprises France, Italy, the Netherlands, and global energy prices declined by 17 percent between Australia, Canada(PMI only), Czech Republic, Denmark, et he reference periods for the October 2018 and current AR(CC only ), Israel, Japan, Korea, New Zealand(PMi only) Singapore(PMI only ), Sweden(CC only), Switzerland, Taiwal 20 World Economic Outlook(WEO)as oil prices aRgentina(CC only), Brazil, China, Colombia from a four-year peak of $81 a barrel in October to India(PMI only Indonesia, Latvia(CC only), Malaysia(PMI only ), Mexico $61 in February(Figure 1.3). While supply influences only), Poland, Russia, South Africa, Thailand(CC only) Ukraine(CC onlyl dominated initially--notably a temporary waiver in US sanctions on Iranian oil exports to certain countries and record-high US crude oil production-weakenit global growth added downward pressure on prices Intemational Monetary Fund April 2019
2 WORLD ECONOMIC OUTLOOK: Growth Slowdown, Precarious Recovery International Monetary Fund | April 2019 subject to new US tariffs declining or stalling toward the end of the year (following some front-loading ahead of tariff hikes; Figure 1.2). Weak expectations of future activity seen in purchasing managers’ indexes point to a continuation of the slow momentum this year. Lower Commodity Prices, Subdued Inflation Pressure Global energy prices declined by 17 percent between the reference periods for the October 2018 and current World Economic Outlook (WEO) as oil prices dropped from a four-year peak of $81 a barrel in October to $61 in February (Figure 1.3). While supply influences dominated initially—notably a temporary waiver in US sanctions on Iranian oil exports to certain countries and record-high US crude oil production—weakening global growth added downward pressure on prices Advanced economies2 Emerging market economies3 World United States Germany China (right scale) United Kingdom Japan Euro area 41 Industrial production World trade volumes Manufacturing PMI: new orders Figure 1.1. Global Activity Indicators (Three-month moving average; year-over-year percent change, unless noted otherwise) Indicators of global activity have generally softened since the second half of 2018. Sources: CPB Netherlands Bureau for Economic Policy Analysis; Haver Analytics; Markit Economics; and IMF staff calculations. Note: CC = consumer confidence; PMI = purchasing managers’ index. 1 Euro area 4 comprises France, Italy, the Netherlands, and Spain. 2 Australia, Canada (PMI only), Czech Republic, Denmark, euro area, Hong Kong SAR (CC only), Israel, Japan, Korea, New Zealand (PMI only), Norway (CC only), Singapore (PMI only), Sweden (CC only), Switzerland, Taiwan Province of China, United Kingdom, United States. 3 Argentina (CC only), Brazil, China, Colombia (CC only), Hungary, India (PMI only), Indonesia, Latvia (CC only), Malaysia (PMI only), Mexico (PMI only), Philippines (CC only), Poland, Russia, South Africa, Thailand (CC only), Turkey, Ukraine (CC only). 5.5 6.0 6.5 7.0 7.5 2015 16 17 18 Feb. 19 –1 –5 96 98 100 102 104 106 108 110 3. Consumer Confidence (Index, 2015 = 100) 112 0 5 10 0 1 2 3 4 5 1. World Trade, Industrial Production, and Manufacturing PMI (Deviations from 50 for Manufacturing PMI) 6 7 2015 16 17 18 Feb. 19 2. Industrial Production 2015 16 17 18 Jan. 19 $16bn effective $34bn effective $200bn 10% effective Other United States United Kingdom Japan China Euro area Jan. 2018 Mar. 18 May 18 Jul. 18 Sep. 18 Nov. 18 2. US Imports from China1 –40 –30 –20 –10 0 10 20 30 40 50 1. Real Exports –5 0 5 10 15 2015 16 17 18: Q4 Source: IMF staff calculations. 1 The vertical bars correspond to the timing of tariff increases: $50bn list announced June 15, 2018; $34bn effective (of $50bn list) July 6, 2018, and $16bn effective (of $50bn list) August 23, 2018; $200bn list announced July 10, 2018, with 10 percent tariff on $200bn effective September 24, 2018. The series show the evolution of US imports of goods in the various tariff lists. bn = billion. Global trade growth has slowed sharply from its peak in late 2017. Following some front-loading, US imports from China subject to new US tariffs declined or stalled toward the end of the year. Figure 1.2. Trade Indicators (Year-over-year percent change)
CHAPTER 1 GLOBAL PROSPECTS AND POLICIES toward the end of 2018. Since the beginning of this Figure 1.3. Commodity Prices ear,oil prices have recovered somewhat thanks to (Deflated using US consumer price index; index, 2014= 100) production cuts by oil-exporting countries. Prices of base metals have increased by 7.6 percent since August Commodity prices have been volatile in recent months, reflecting shifting supply influences against a backdrop of subdued demand. as a result of supply disruption in some metal markets more than offset Average petroleum spot price --Food--Metals Consumer price infation remained muted across dvanced economies, given the drop in commodity prices(Figure 1.4). For most countries in this group core inflation is well below central bank targets despite the pickup in domestic demand in the past two years; in the United States and United Kingdom, it is close to 2 percent. Although wage growth has been picking up across most advanced economies, notably in the United States and United Kingdom, it is still sluggish despite lower unemployment rates and diminished labor market slack. With wage growth broadly in line with labor productivity growth, unit labor costs continue to be restrained (Box 1.1) Consistent with subdued overall price and wage pres- sures,and possibly reinforced by the slowing growth nomentum,inflation expectations remain contained across advanced economies, and, in many cases,have Among emerging market economies, core inflation Sources: IMF, Primary Commodity Price System; and IMF staff calculations has remained below 2 percent in China as activity has moderated. In other cases, inflation pressure has eased Financial conditions in advanced economies have eased range with the drop in commodity prices(Indonesia) since start of the year, after tightening sharply in and slowdown in food inflation(India). For some the final months of 2018 on equity price declines and economies, currency depreciations have passed through higher risk spreads. As of early March,conditions were to higher domestic prices, partially offsetting down- slightly tighter than in October( Figure 1.5; Figure 1.2 ward pressure from lower commodity prices of the April 2019 Global Financial Stability Report (GFSR), but, in most cases, still accommodative. This Financial Conditions Are Marginally Tighter than in the falls localized pressures Continue yields dropped as investors reassessed the outlook for Following a notable tightening of financial condi- monetary policy normalization. The change in tone tions in late 2018. market sentiment rebounded in of communications by major central banks has been early 2019. Signs of slowing global growth, moderately an important contributor to the easing of financial less buoyant corporate earnings, and market concerns conditions since early 2019. In January,communica- about the pace of Federal Reserve policy tightening tion by the US Federal Reserve suggested a patient and weighed on sentiment at the end of 2018. Prospect ne v arch meeting of the Federal Open Market Commit fexible approach to policy normalization, and at the rly exit from the European Union(a"no-deal Brexit") and news about it signaled a its interest rate hikes for this macroeconomic stimulus and liquidity support in year(see the April 2019 GFSR). The Eur opean Central China have also influenced market movements since Bank, which ended its net asset purchases in December, October. More recently, a shift toward more accommo- announced in March a new round of targeted bank dative monetary policy stances by major central banks financing and further postponed a rise in policy rates to (including a pause in interest rate hikes by the Federal at least the end of this year. The Bank of England and Reserve)and the outcome of US-China trade negotia- Bank of Japan have increasingly taken more cautious tions have supported a rebound in sentiment views on the outlook. Consistent with this shift in tone International Monetary Fund April 2019
3 CHAPTER 1 Glob al Prospects and Policies International Monetary Fund | April 2019 toward the end of 2018. Since the beginning of this year, oil prices have recovered somewhat thanks to production cuts by oil-exporting countries. Prices of base metals have increased by 7.6 percent since August as a result of supply disruption in some metal markets more than offsetting subdued global demand. Consumer price inflation remained muted across advanced economies, given the drop in commodity prices (Figure 1.4). For most countries in this group, core inflation is well below central bank targets despite the pickup in domestic demand in the past two years; in the United States and United Kingdom, it is close to 2 percent. Although wage growth has been picking up across most advanced economies, notably in the United States and United Kingdom, it is still sluggish despite lower unemployment rates and diminished labor market slack. With wage growth broadly in line with labor productivity growth, unit labor costs continue to be restrained (Box 1.1). Consistent with subdued overall price and wage pressures, and possibly reinforced by the slowing growth momentum, inflation expectations remain contained across advanced economies, and, in many cases, have softened recently. Among emerging market economies, core inflation has remained below 2 percent in China as activity has moderated. In other cases, inflation pressure has eased toward the lower bound of the central bank’s target range with the drop in commodity prices (Indonesia) and slowdown in food inflation (India). For some economies, currency depreciations have passed through to higher domestic prices, partially offsetting downward pressure from lower commodity prices. Financial Conditions Are Marginally Tighter than in the Fall; Localized Pressures Continue Following a notable tightening of financial conditions in late 2018, market sentiment rebounded in early 2019. Signs of slowing global growth, moderately less buoyant corporate earnings, and market concerns about the pace of Federal Reserve policy tightening weighed on sentiment at the end of 2018. Prospects for a disorderly exit of the United Kingdom from the European Union (a “no-deal Brexit”) and news about macroeconomic stimulus and liquidity support in China have also influenced market movements since October. More recently, a shift toward more accommodative monetary policy stances by major central banks (including a pause in interest rate hikes by the Federal Reserve) and the outcome of US–China trade negotiations have supported a rebound in sentiment. Financial conditions in advanced economies have eased since the start of the year, after tightening sharply in the final months of 2018 on equity price declines and higher risk spreads. As of early March, conditions were slightly tighter than in October (Figure 1.5; Figure 1.2 of the April 2019 Global Financial Stability Report (GFSR)), but, in most cases, still accommodative. This is especially the case in the United States, where bond yields dropped as investors reassessed the outlook for monetary policy normalization. The change in tone of communications by major central banks has been an important contributor to the easing of financial conditions since early 2019. In January, communication by the US Federal Reserve suggested a patient and flexible approach to policy normalization, and at the March meeting of the Federal Open Market Committee, it signaled a pause in its interest rate hikes for this year (see the April 2019 GFSR). The European Central Bank, which ended its net asset purchases in December, announced in March a new round of targeted bank financing and further postponed a rise in policy rates to at least the end of this year. The Bank of England and Bank of Japan have increasingly taken more cautious views on the outlook. Consistent with this shift in tone, Average petroleum spot price Food Metals Figure 1.3. Commodity Prices (Deflated using US consumer price index; index, 2014 = 100) Commodity prices have been volatile in recent months, reflecting shifting supply influences against a backdrop of subdued demand. 20 40 60 80 100 120 2014 15 16 17 18 Feb. 19 Sources: IMF, Primary Commodity Price System; and IMF staff calculations
WORLD ECONOMIC OUTLOOK: GROWTH SLOWDOWN, PRECARIOUS RECOVERY Figure 1.4. Global Inflation Figure 1.5. Advanced Economies: Monetary and Financial hree-month moving average: annualized percent change, unless noted Market Conditions (Percent, unless noted otherwise) drop in commodity prices. For some emerging market economies, currency Financial conditions in advanced economies have eased since the start of the depreciations have passed to higher domestic prices, partially offset year, after tightening sharply in the final months of downward pressure from lower commodity prices 3.5-1 US Policy Rate 2. Policy Rate Expectat Core consumer price inflation Expectations' 1. Advanced economies the October 2018 WEO) United states Mar.22,2019 2015 2018192021Ma.2018192021Mar. Emerging Market and Developing Economies 6-3. 10-Year Government Bond --4 Credit Spreads -1000 United Kingd US high yield 800 3 US high grade.-200 4-3. Core Consumer Price Inflation Euro high grade Three-month moving average; ye 2015161718Mar.2015161718 United States-United Kingdom -Euro area -Japan 2 220-5. Equity Markets 6. Price-to-Earnings Ratios -35 00-(ndex2007=100 S&P500 Germany 2015 2.2-4. Consumer Price Inflation Expectations 2.1 0 AEs-EMDEs (right scale 4.0 40--Euro Stoxx 10 20--MSCI Emerging Market -3.6 2015161718Mar.2015161718Mar 3.2 Sources: Bloomberg Finance LP. Haver Analytics; Thomson Reuters Datastream ote: MSCI= Morgan Stanley Capital Intemational; S&P= Standard Poor Sources: Consensus Economics; Haver Analytics; and IMF staff calculation 'Expectations are based on the federal funds rate futures for the United States, the lote: AEs=advanced economies (AUT, BEL, CAN, CHE, CZE, DEU, DNK, ESP, EST. sterling ovemight interbank average rate for the United Kingdom, and the euro interbank offered FIN, FRA, GBR, GRC, HKG, IRL, ISR, ITA, JPN, KOR, LTU, LUX, LVA, NLD, NOR, PRT, 2Data are through March 22, 2019 for the euro area; updated March 22, 2019. oping countries prise BGR, BRA, CHL, CHN, COL, HUN, IDN, IND, MEX, MYS, PER, PHL, POL, ROU, RUS, THA, TUR, ZAF Count Standardization(sO)country codes 1AEs include AUS: exclude LUX Intemational Monetary Fund April 2019
4 WORLD ECONOMIC OUTLOOK: Growth Slowdown, Precarious Recovery International Monetary Fund | April 2019 Mar. 21, 2018 Sep. 17, 2018 Mar. 22, 2019 United States Euro area United Kingdom United States Japan Germany Italy S&P 500 TOPIX Euro Stoxx MSCI Emerging Market Japan United States United Kingdom Germany Italy Figure 1.5. Advanced Economies: Monetary and Financial Market Conditions (Percent, unless noted otherwise) 2018 19 20 21 Mar. 22 2015 16 17 18 3. 10-Year Government Bond Yields2 4. Credit Spreads2 (Basis points) US high yield Euro high yield US high grade 6. Price-to-Earnings Ratios2 Euro high grade 2015 16 17 18 Mar. 19 Mar. 19 5. Equity Markets2 (Index, 2007 = 100) 2015 16 17 18 2015 16 17 18 Mar. 19 Mar. 19 0 20 40 60 80 100 120 140 160 180 200 220 –1 0 1 2 3 4 5 6 2. Policy Rate Expectations1 (Dashed lines are from the October 2018 WEO) 1. US Policy Rate Expectations1 1.0 1.5 2.0 2.5 3.0 3.5 2018 19 20 21 Mar. 22 5 10 15 20 25 30 35 0 200 400 600 800 1,000 –1 0 1 2 3 4 5 6 7 8 Financial conditions in advanced economies have eased since the start of the year, after tightening sharply in the final months of 2018. Sources: Bloomberg Finance L.P.; Haver Analytics; Thomson Reuters Datastream; and IMF staff calculations. Note: MSCI = Morgan Stanley Capital International; S&P = Standard & Poor’s; TOPIX = Tokyo Stock Price Index; WEO = World Economic Outlook. 1 Expectations are based on the federal funds rate futures for the United States, the sterling overnight interbank average rate for the United Kingdom, and the euro interbank offered forward rate for the euro area; updated March 22, 2019. 2 Data are through March 22, 2019. Consumer price inflation remained muted across advanced economies, given the drop in commodity prices. For some emerging market economies, currency depreciations have passed through to higher domestic prices, partially offsetting downward pressure from lower commodity prices. Sources: Consensus Economics; Haver Analytics; and IMF staff calculations. Note: AEs = advanced economies (AUT, BEL, CAN, CHE, CZE, DEU, DNK, ESP, EST, FIN, FRA, GBR, GRC, HKG, IRL, ISR, ITA, JPN, KOR, LTU, LUX, LVA, NLD, NOR, PRT, SGP, SVK, SVN, SWE, TWN, USA); Emerging market and developing countries comprise BGR, BRA, CHL, CHN, COL, HUN, IDN, IND, MEX, MYS, PER, PHL, POL, ROU, RUS, THA, TUR, ZAF. Country list uses International Organization for Standardization (ISO) country codes. 1 AEs include AUS; exclude LUX. 4. Consumer Price Inflation Expectations (Percent) 1.4 1.5 1.6 1.7 1.8 1.9 2.0 2.1 2.2 0 2015 16 17 2016 17 18 Feb. 19 3.0 3.2 3.4 3.6 3.8 4.0 4.2 Jan. 19 1 2 3 4 1 2 3 4 5 6 1. Advanced Economies –2 –1 0 1 2 3 2015 16 2015 16 17 Jan. 19 17 Jan. 19 Figure 1.4. Global Inflation (Three-month moving average; annualized percent change, unless noted otherwise) 3. Core Consumer Price Inflation (Three-month moving average; year-over-year percent change) 2. Emerging Market and Developing Economies 18 18 18 Consumer price inflation Core consumer price inflation United States United Kingdom Euro area Japan AEs1 EMDEs (right scale)