09 Oct

IMF: Global growth for 2018–19 is projected to remain steady at its 2017 level, but its pace is less vigorous than previously projected

International Monetary Fund (IMF) has just published the last report about global economy. According to the figures, global growth for 2018–19 is projected to remain steady at its 2017 level, but its pace is less vigorous than projected in April and it has become less balanced. Downside risks to global growth have risen in the past six months and the potential for upside surprises has receded.

Global growth is projected at 3.7% for 2018–19 —0.2 percentage point lower for both years than forecast in April. The downward revision reflects surprises that suppressed activity in early 2018 in some major advanced economies, the negative effects of the trade measures implemented or approved between April and mid-September, as well as a weaker outlook for some key emerging market and developing economies arising from country-specific factors, tighter financial conditions, geopolitical tensions, and higher oil import bills.

In advanced economies, economic activity lost some momentum in the first half of 2018 after peaking in the second half of 2017. Outcomes fell short of projections in the euro area and the United Kingdom; growth in world trade and industrial production declined; and some high-frequency indicators moderated.

Core inflation remains very different across advanced economies—well below objectives in the euro area and Japan, but close to target in the United Kingdom and the United States. Across emerging

market and developing economies, activity continued to improve gradually in energy exporters but softened in some importers. Activity slowed more markedly in Argentina, Brazil, and Turkey, where country-specific factors and a souring of investor sentiment were also at play.

Inflation has generally increased in emerging market and developing economies, in part reflecting the pass-through of currency depreciations. While financial

conditions have tightened in many emerging market and developing economies, they remain supportive in advanced economies, despite continued federal funds rate increases in the United States.

Global growth is forecast at 3.7 percent for 2018–19, 0.2 percentage point below the April 2018 WEO projection, and is set to soften over the medium term. Global financial conditions are expected to tighten as monetary policy normalizes; the trade measures implemented since April will weigh on activity in 2019 and beyond; US fiscal policy will subtract momentum starting in 2020; and China will slow, reflecting weaker credit growth and rising trade barriers. In advanced economies, marked slowdowns in working-age population growth and lackluster productivity advances will hold back gains in medium-term potential output.

Global Recovery 10 Years after the 2008 Financial Meltdown

This chapter of the report takes stock of the global economic recovery a decade after the 2008 financial crisis. Output losses after the crisis appear to be persistent, irrespective of whether a country suffered a banking crisis in 2007–08. Sluggish investment was a key channel through which these losses registered, accompanied by long-lasting capital and total factor productivity shortfalls relative to precrisis trends.

Policy choices preceding the crisis and in its immediate aftermath influenced postcrisis variation in output. Underscoring the importance of macroprudential policies and effective supervision, countries with greater financial vulnerabilities in the precrisis years suffered larger output losses after the crisis. Countries with stronger precrisis fiscal positions and those with more flexible exchange rate regimes experienced smaller losses. Unprecedented and exceptional policy actions taken after the crisis helped mitigate countries’ postcrisis output losses.

Click here to access the full report published by IMF.

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