## IMF EXECUTIVE BOARD DISCUSSION SUMMARY

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### Assessment of global outlook and risks
- Global economic activity had recently lost momentum, reflecting a confluence of factors in a number of large economies.
- Global trade had slowed sharply, and concerns over trade tensions weakened business confidence.
- Growth is expected to level off in the first half of this year and firm up thereafter, but this short-term outlook is subject to considerable uncertainty.
- Over the medium term:
  - Growth is expected to moderate further in advanced economies due to population aging constraining labor force expansion and tepid labor productivity growth.
  - In emerging market and developing economies, growth is expected to increase modestly.
  - Convergence toward advanced economy income levels remains slow for many emerging market and developing economies, due to structural bottlenecks and, in some cases, high debt, subdued commodity prices, and civil strife.
- Risks to the global outlook remain skewed to the downside amid high policy uncertainty, including:
  - A reescalation of trade tensions and disruptions from a no-deal Brexit.
  - A sudden shift in market sentiment and associated tightening in financial conditions given still-accommodative financial conditions.
  - Downside risks in systemic economies, which, if they materialize, would weigh on the outlook.
- Upside scenario:
  - If recent tariff increases are rolled back and trade tensions resolved, rising business confidence could lift growth.
- Over the medium term, additional risks noted include rising inequality, climate change, cyber risks, political uncertainty, and declining trust in institutions.

### Global cooperation and rebalancing
- Urgent need for strong global cooperation and coordination to tackle shared challenges.
- Priority actions highlighted:
  - Resolve trade disagreements cooperatively without raising further distortionary barriers.
  - Strengthen the open, rules-based multilateral trading system.
  - Cooperate more closely on financial regulatory reforms, the global financial safety net, international corporate taxation, and climate change.
- External rebalancing depends on:
  - Macroeconomic and structural policies tailored to domestic conditions to increase demand and growth potential in surplus countries.
  - Initiatives to boost supply and potential output in deficit countries.

### Macroeconomic policy guidance
- With waning global growth momentum and limited policy space in many countries, policymakers should:
  - Avoid policy missteps, contain risks, and enhance resilience while raising inclusive growth prospects.
  - Carefully calibrate macroeconomic policies to support growth where output may fall below potential and policy space exists, and ensure a soft landing where policy support needs to be withdrawn.
  - If a deeper or protracted downturn occurs, policies should become more accommodative where feasible.
- Fiscal policy principles:
  - Strike the right balance between growth and debt sustainability objectives as appropriate in individual countries.
  - In countries with high debt, gradual fiscal adjustment is needed, particularly if financing risks are large.
  - In countries with fiscal space, fiscal policy should boost aggregate demand where there is slack and raise potential growth where the economy is operating above potential.
  - Automatic stabilizers play a role during cyclical downswings.
  - In the event of a more protracted slowdown in growth, care should be taken to avoid a procyclical fiscal stance.
  - Fiscal policy should adapt to shifting demographics, advancing technology, and deepening global integration; where budgetary room is limited, this will require budget recomposition and reprioritization.
- Monetary policy:
  - Directors welcomed the more gradual approach to monetary policy normalization by major central banks since the beginning of this year, which has helped boost positive market sentiment.
  - Policymakers should clearly communicate any reassessment of the pace of monetary policy normalization that reflects changes in the economic outlook or risks, to avoid excessive market swings or unduly compressed market volatility.

### Financial vulnerabilities and prudential policy
- With financial conditions still accommodative as the credit cycle matures, financial vulnerabilities are likely to continue building in different parts of the global economy, including:
  - Rising corporate debt.
  - Sovereign–financial sector nexus.
  - Maturity and liquidity mismatches.
  - House price misalignment.
  - Sensitivity of portfolio flows and asset prices in emerging markets to changes in global financial conditions.
- The tightening in financial conditions late last year was too short-lived to meaningfully slow the buildup of vulnerabilities, leaving medium-term risks to global financial stability broadly unchanged.
- Policy recommendations:
  - Deploy prudential tools proactively.
  - Expand macroprudential toolkits.
  - Continue to repair public and private balance sheets.

### Structural reforms and governance
- Across all economies, growth-enhancing structural reforms remain key to improving potential output, inclusiveness, and resilience.
- High debt levels require a multi-pronged approach, including enhancing debt transparency and management.
- Broader structural reforms should:
  - Aim to lift productivity, encourage labor force participation, and upgrade skills.
  - Include further deregulation in product markets and services, supported by stronger competition law and policy, to help deter the rise in corporate market power in advanced economies.
- Corruption concerns:
  - Corruption could undermine inclusive growth, public finances, and poverty reduction efforts.
  - Need to improve fiscal institutions, transparency, and governance in the public sector.
  - Greater global cooperation is essential to combat foreign bribery and money laundering of proceeds from corrupt activities, and to improve the sharing of information to fight tax evasion and prosecute corrupt acts.

### Guidance for emerging market, developing, and low-income economies
- Emerging market and developing economies:
  - Focus monetary policy on anchoring inflation expectations where inflation remains high, and support domestic activity as needed where expectations are well anchored.
  - Continue efforts to raise revenue, reduce debt-related vulnerabilities, and make steady progress on economic and financial rebalancing, depending on country circumstances.
- Low-income developing economies:
  - Adopt policies that focus on drivers of growth, raise resilience to volatile external conditions, durably reduce debt vulnerabilities, and advance toward the 2030 Sustainable Development Goals.
  - Priorities include improving macroeconomic and macroprudential policy frameworks, strengthening domestic resource mobilization, and gearing fiscal policy toward supporting growth and development objectives, including protection for social spending and carefully selected capital projects.
  - Commodity exporters should continue diversifying their economies through policies that improve education quality, narrow infrastructure gaps, enhance financial inclusion, and boost private investment.

*IMF Executive Board discussion of the Fiscal Monitor, Global Financial Stability Report, and World Economic Outlook on March 21, 2019.*

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_Source: https://www.imf.org/-/media/files/publications/gfsr/2019/april/english/boardsum.pdf_