Global growth to slow but EMs will see expansion says IMF

Economic outlook updated at Davos and highlights some positives for the years ahead

Global growth to slow but EMs will see expansion says IMF
Steve Randall

The threat of a long-term trade war between the US and Canada and of a no-deal Brexit have receded, but global growth is still expected to slow down slightly in the next two years.

The IMF updated its global economic outlook at the World Economic Forum at Davos this week. It is calling for global growth of 3.3% in 2020, up from 2.9% in 2019. However, this is slower than the 3.4% pace it forecasted in October, with that level of growth now slated for 2021.

Despite the slower pace, the IMF outlook paints a generally optimistic picture with expectation that the manufacturing slump and global trade issues are bottoming out.

But the organization’s chief economist Gita Gopinath blogged that “the projected recovery for global growth remains uncertain” with reliance on growth in some emerging economies that are currently underperforming, while developed economies stabilize around current levels.

For now, the IMF is expecting stronger growth for emerging markets and developing economies with a pickup in growth from 3.7% in 2019 to 4.4% in 2020 and 4.6% in 2021, but these are a downward revision of 0.2 percent for all years.

For advanced economies, growth is projected to slow slightly from 1.7 in 2019 to 1.6% in 2020 and 2021.

Be ready for a slowdown
In her opening remarks at Davos, IMF managing director Kristalina Georgieva said it was important for policymakers to keep doing what works, to build resilience, and to be prepared for things to change.

“This means keeping well-planned fiscal measures in your back pocket—projects that can quickly get off the ground. And if risks do materialize, countries may need to act together by launching a coordinated fiscal response,” she said.