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### Emerging Market and Developing Economies — recent developments
- China:
  - 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 softened; automobile sales declined in 2018 following the expiration of incentive programs for car purchases.
  - Export orders diminished as US tariff actions began to take hold in the second half of the year.
  - 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 weakening in import demand appeared to have impacts on trading partner exports in Asia and Europe.
- Other 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 cancellation of a planned airport for the capital and backtracking on energy and education reforms.
  - Geopolitical tensions contributed to weaker activity in the Middle East.

### Advanced Economies — recent developments
- Euro area slowdown drivers:
  - Weakening consumer and business sentiment.
  - Delays associated with the introduction of new fuel emission standards for diesel-powered vehicles in Germany.
  - Fiscal policy uncertainty, elevated sovereign spreads, and softening investment in Italy.
  - Street protests that disrupted retail sales and weighed on consumption spending in France.
  - Growing concerns about a no-deal Brexit likely weighed on investment spending.
  - Exports softened considerably, in part because of weak intra-euro-area trade.
- Other advanced economies:
  - Japan: activity weakened largely due to natural disasters in the third quarter.
  - United States: momentum remained robust amid a tight labor market and strong consumption growth, but investment appeared to soften in the second half of the year.
- Common influence: high policy uncertainty from US–China trade dispute truce, Brexit negotiations, Italian budget discussions, Mexican policy changes, US federal government shutdown, and US policy on Iran.

### Softening industrial production and trade
- Industrial production decelerated, particularly for capital goods.
- Slowdown was broad based, notably across advanced economies, except the United States.
- Global trade growth slowed sharply from its peak in late 2017.
- US tariffs on trade with China (timing noted in source):
  - $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.
  - US imports from China subject to new US tariffs declined or stalled toward the end of the year following some front-loading.

### Commodity prices and inflation dynamics
- Energy and commodities:
  - Global energy prices declined by 17 percent between the reference periods for the October 2018 and current WEO as oil prices dropped from $81 a barrel in October to $61 in February.
  - Since the beginning of the year, oil prices recovered somewhat thanks to production cuts by oil-exporting countries.
  - Prices of base metals increased by 7.6 percent since August as supply disruption in some metal markets more than offset subdued global demand.
- Inflation:
  - Consumer price inflation remained muted across advanced economies given the drop in commodity prices.
    - For most advanced economies, core inflation is well below central bank targets; in the United States and United Kingdom, it is close to 2 percent.
    - Wage growth has been picking up across most advanced economies (notably in the United States and United Kingdom) but remains sluggish; unit labor costs continue to be restrained.
    - Inflation expectations remain contained and, in many cases, have softened recently.
  - Emerging market economies:
    - Core inflation remained below 2 percent in China as activity moderated.
    - Inflation pressure eased toward the lower bound of central bank target ranges in Indonesia (drop in commodity prices) and India (slowdown in food inflation).
    - Currency depreciations in some economies passed through to higher domestic prices, partially offsetting downward pressure from lower commodity prices.

### Financial conditions and capital flows
- Late 2018 tightening of financial conditions was followed by a rebound in early 2019.
  - Contributing factors to late-2018 tightening: slowing global growth, less buoyant corporate earnings, market concerns about pace of Federal Reserve policy tightening, no-deal Brexit prospects, and macroeconomic stimulus/liquidity support news from China.
  - Early-2019 easing reflected a shift toward more accommodative monetary policy stances by major central banks and progress in US–China trade negotiations.
- Advanced economies:
  - Financial conditions eased since the start of the year but, as of early March, were slightly tighter than in October.
  - Bond yields on 10-year US Treasury notes, German bunds, and UK gilts priced in a lower path for future policy rates and are generally 40–80 basis points below the peaks of early November 2018.
  - Italian spreads over German bunds were about 250 basis points as of late March—down from late-October/early-November peaks but remain elevated.
  - Riskier asset classes benefited from improved sentiment; equity markets in the United States and Europe regained footing; high-yield corporate spreads narrowed since December but remain wider than in October.
- Emerging market economies:
  - Financial conditions improved in early 2019 but remain somewhat tighter than in October.
  - Central banks in Chile, Indonesia, Mexico, Philippines, and South Africa have lifted policy rates since October.
  - In China, the central bank provided liquidity support and reduced reserve requirements for all banks.
  - Mexico: sovereign spread widened notably in November and December on policy reversal concerns but has since narrowed.
  - Brazil: spreads have declined since October amid optimism about pension reform prospects.
  - Argentina and Turkey: spreads declined somewhat following adjustments to rein in financial imbalances but remain elevated.
  - Emerging market equity indexes recovered ground lost in late 2018 and are broadly at or have surpassed October levels in most cases.
- Exchange rates and portfolio flows:
  - As of late March, the US dollar was back to its September 2018 level after reversing late-2018 appreciation.
  - The euro depreciated by about 3 percent over this period; the yen appreciated modestly; the pound strengthened by about 3 percent.
  - Emerging market currencies generally strengthened, including the Argentine peso, the Turkish lira, the Brazilian real, the South African rand, the Indian rupee, and the Russian ruble; the Chinese renminbi strengthened by about 2 percent.
  - Improved sentiment was reflected in stabilization and subsequent recovery in portfolio flows to emerging markets.

### Forecast: near-term moderation, then modest pickup (global and group projections)
- Global:
  - World: 3.6 percent in 2018; 3.3 percent in 2019; 3.6 percent in 2020.
  - The forecast for 2019 is 0.4 percentage point lower than in the October 2018 WEO; the forecast for 2020 is 0.1 percentage point lower.
- Advanced economies:
  - 2.2 percent in 2018; 1.8 percent in 2019; 1.7 percent in 2020.
  - Slowdown in advanced economies accounts for over two-thirds of the expected deceleration in global growth relative to 2018.
- Emerging Market and Developing Economies:
  - 4.5 percent in 2018; 4.4 percent in 2019; 4.8 percent in 2020.
  - The 2019 projection is 0.3 percentage point lower than in the October 2018 WEO.

### Key country and regional projections (selected figures preserved exactly)
- United States: 2.9 percent in 2018; 2.3 percent in 2019; 1.9 percent in 2020.
- Euro Area: 1.8 percent in 2018; 1.3 percent in 2019; 1.5 percent in 2020.
- Germany: 1.5 percent in 2018; 0.8 percent in 2019; 1.4 percent in 2020.
- Japan: 0.8 percent in 2018; 1.0 percent in 2019; 0.5 percent in 2020.
- China: 6.6 percent in 2018; 6.3 percent in 2019; 6.1 percent in 2020.
- India: 7.1 percent in 2018; 7.3 percent in 2019; 7.5 percent in 2020.
- Emerging and Developing Asia: 6.4 percent in 2018; 6.3 percent in 2019; 6.3 percent in 2020.
- Latin America and the Caribbean: 1.0 percent in 2018; 1.4 percent in 2019; 2.4 percent in 2020.
- Brazil: 1.1 percent in 2018; 2.1 percent in 2019; 2.5 percent in 2020.
- Mexico: 2.0 percent in 2018; 1.6 percent in 2019; 1.9 percent in 2020.
- Russia: 2.3 percent in 2018; 1.6 percent in 2019; 1.7 percent in 2020.
- Saudi Arabia: 2.2 percent in 2018; 1.8 percent in 2019; 2.1 percent in 2020.
- Sub-Saharan Africa: 3.0 percent in 2018; 3.5 percent in 2019; 3.7 percent in 2020.
- South Africa: 0.8 percent in 2018; 1.2 percent in 2019; 1.5 percent in 2020.

### Drivers, assumptions, and risks embedded in baseline
- Tariffs: baseline assumes tariffs on $200 billion of US imports from China remaining at 10 percent (rather than rising to 25 percent as previously assumed).
- Fiscal policy:
  - Expansionary across advanced economies in 2019 and expected to turn contractionary in 2020 as the US stimulus starts going into reverse.
  - Expansionary across emerging market and developing economies in 2019 (in part reflecting a projected fiscal stimulus in China), before turning contractionary in 2020.
- Commodity price assumptions:
  - Based on oil futures contracts, average oil prices are projected at $54.1 in 2019, rising to $55.2 in 2020.
  - Metal prices are expected to decline 6.0 percent year over year in 2019 and decline a further 0.8 percent in 2020.
  - Food prices are projected to decline 2.6 percent year over year in 2019 before increasing by 1.7 percent in 2020.
- Near-term risks for EMDEs:
  - Interaction of country-specific fundamentals with a challenging external environment (slowdown in advanced economies; trade tensions; expected gradual tightening of financial conditions in the United States).
  - For commodity exporters, a generally subdued outlook for commodity prices.
  - Country-specific distress in some economies (recession in Turkey; deepening contraction in Iran) that weigh on group aggregate growth.

### Regional near-term outlook highlights
- Emerging and developing Europe:
  - Activity in 2019 expected to weaken more than previously anticipated before recovering in 2020.
  - Sizable revision mostly due to substantial projected contraction in Turkey in 2019.
- Latin America:
  - Growth projected to recover to 1.4 percent in 2019 and 2.4 percent in 2020.
  - Mexico: growth now forecast to remain below 2 percent in 2019–20, a markdown close to 1 percentage point for both years relative to October.
  - Argentina: economy projected to contract in the first half of 2019 then return to growth in the second half.
  - Venezuela: economy expected to contract by one-fourth in 2019, and a further 10 percent in 2020.
- MENAP:
  - Growth expected to decline to 1.5 percent in 2019 before recovering to about 3.2 percent in 2020.
- Sub-Saharan Africa:
  - Growth expected to pick up to 3.5 percent in 2019 and 3.7 percent in 2020 (from 3.0 percent in 2018).
  - Projection is 0.3 percentage point and 0.2 percentage point lower for 2019 and 2020, respectively, than in the October 2018 WEO.
  - South Africa: 0.8 percent in 2018 to 1.2 percent in 2019 and 1.5 percent in 2020, a 0.2 percentage point downward revision for both years relative to October projections.
- CIS:
  - Activity projected to expand about 2¼ percent in 2019–20.

### Medium-term growth projections (beyond 2020)
- Global growth is set to plateau at 3.6 percent over the medium term.
- Advanced economies: growth projected to slow to 1.6 percent by 2022 and remain at that level thereafter.
- EMDEs: growth projected to stabilize at about 4.8 percent over the medium term.
- EMDEs’ share of global growth projected to increase from 76 percent in 2019 to about 85 percent in 2024.
- Regional medium-term specifics:
  - Emerging Asia: growth expected to remain above 6 percent through the forecast horizon.
    - China: gradual slowdown to 5.5 percent by 2024.
    - India: growth expected to stabilize at just under 7¾ percent over the medium term.
  - Latin America: increase from 2.4 percent in 2020 to 2.8 percent over the medium term.
    - Argentina: projected to strengthen to about 3½ percent over the medium term.
    - Brazil and Mexico: projected growth in the range of 2¼–2¾ percent.
  - Emerging Europe: just above 3 percent over the medium term; Turkey: pick up to 3.5 percent.
  - CIS: stabilize at 2.4 percent; Russia: about 1½ percent.
  - Sub-Saharan Africa: increase from 3.7 percent in 2020 to about 4 percent in 2024.
    - Nigeria and Angola: about 2.6 percent and 3.9 percent, respectively.
    - South Africa: stabilize at 1¾ percent.
  - MENAP: medium-term shaped by fuel price outlook and macroeconomic adjustments.
    - Saudi Arabia: expected to stabilize at about 2¼–2½ percent.
    - Pakistan: without further adjustment, projected to remain subdued at about 2.5 percent.

### Convergence and distributional concerns
- Across sub-Saharan Africa and MENAP, 41 economies (accounting for close to 10 percent of global GDP in purchasing-power-parity terms and close to 1 billion in population) are projected to grow by less than advanced economies in per capita terms over the next five years.
- Substantial heterogeneity in per capita growth rates within sub-Saharan Africa; for close to two-fifths of economies, the average growth rate over the medium term is projected to exceed 5 percent.

### Inflation outlook (selected projections)
- Advanced economies:
  - Inflation projected to decline to 1.6 percent this year from 2.0 percent in 2018.
  - US: core inflation expected to exceed the medium-term target of 2.0 percent this year and next, then decline to target thereafter.
  - Euro area: core inflation expected to gradually increase from 1.2 percent in 2018 to about 2 percent in 2022.
  - Japan: core inflation projected to rise to 1.4 percent by the end of 2020, softening back to about 1.3 percent in the medium term.
- Emerging market and developing economies (excluding Venezuela):
  - Inflation expected to firm to 4.9 percent this year from 4.8 percent in 2018.
  - Inflation set to moderate to about 4 percent over the medium term as temporary effects fade and growth stabilizes.

### External sector outlook
- Trade growth slowed considerably in 2018; further slowdown expected in 2019 with some recovery in 2020.
- Current account positions:
  - Higher oil prices estimated to have boosted the current account balance of oil exporters by about 3½ percent of their GDP.
  - China’s current account surplus declined to 0.4 percent of GDP; US current account deficit unchanged at 2.3 percent; euro area surplus declined marginally to 3.0 percent.
  - United States current account balance projected to widen in 2019–20—driven by expansionary fiscal policy—and to narrow thereafter.
- Adjustment of excess current account balances:
  - The change in the current account balance during 2018 is estimated to have offset, on average, about one-fifth of the 2017 current account gap; the change between 2017 and 2024 would offset less than half of the 2017 gap.

### International investment positions and implications
- Changes reflect net financial flows and valuation changes from exchange rates and asset prices.
- WEO projections assume broadly stable real effective exchange rates and limited variation in asset prices; changes driven by net external borrowing and lending.
- Decline in global equity prices in late 2018 implies deterioration of international investment positions for countries with significant net holdings of equity and FDI abroad and corresponding improvement for net equity liability countries.
- Projected regional/country positions by 2024 (percent of GDP):
  - Net creditor position of advanced European economies: above 80 percent of GDP.
  - Net creditor position of Japan: to exceed 65 percent of GDP.
  - Net creditor position of China: decline to below 10 percent of GDP.
  - Debtor position of the United States: projected to approach 50 percent of GDP, some 9 percentage points above the 2017 estimate.
  - Net international investment position of a group of euro area debtor countries expected to improve by more than 25 percentage points of their collective GDP; by 2024, net foreign liabilities for the group would be about 32 percent of their GDP.

### Balance of risks — skewed to the downside (key risk factors)
- Trade tensions and unresolved US–China negotiations could raise costs of imported intermediate and capital goods, increase final goods prices, reduce business investment, disrupt supply chains, and depress corporate profitability and financial market sentiment.
- Downside risks in systemic economies:
  - Europe: elevated yields in Italy, a no-deal Brexit, or delayed euro-area architecture strengthening.
  - United States: potential market reassessment leading to higher US interest rates and renewed dollar appreciation.
  - China: failure of trade tensions to ease or excessive stimulus that loosens credit standards could heighten financial vulnerabilities.
- Other vulnerabilities: cyberattacks; reversals of postcrisis regulatory reform; political uncertainty; climate change impacts (IPCC reported in October 2018 that global warming could reach 1.5°C above preindustrial levels between 2030 and 2052).

### Fan chart and growth-at-risk analysis
- Fan chart shows a downward shift in the balance of risks relative to the April 2018 WEO.
- Growth-at-risk analysis suggests slightly higher near-term downside risks to global financial stability compared with the October 2018 report and continued elevated risks to medium-term growth.

### Policy priorities: enhance resilience and raise medium-term growth prospects
- Main priorities:
  - Avoid policy missteps that could harm economic activity.
  - Monetary policy: aim to keep inflation on track toward central bank targets and keep inflation expectations anchored.
  - Fiscal policy: manage trade-offs between supporting demand and ensuring public debt remains on a sustainable path; calibrate pace of fiscal consolidation to secure stability without suppressing near-term growth or harming programs that protect the vulnerable.
  - Financial sector policies: strengthen resilience against financial vulnerabilities (raise bank capital and liquidity buffers; enhance macroprudential oversight of nonbank financial institutions; develop macroprudential tools).
  - Structural policies: raise labor force participation and productivity (public investment, lifelong learning, R&D, competition policy).

### No-deal Brexit scenario analysis (Scenario Box 1.1)
- Model: IMF’s Global Integrated Monetary and Fiscal model; two scenarios (A and B) comparing outcomes to April 2019 WEO baseline.
- Common assumptions:
  - UK leaves EU customs union and single market and reaches a broad free trade agreement under the baseline; no-deal scenarios assume reversion to MFN rules and increased nontariff barriers.
  - Assumed reduction in net migration flow from the EU to the UK of 25,000 people per year until 2030.
- Scenario A (no border disruptions; small financial tightening):
  - UK sovereign spreads increase by 12.5 basis points; UK corporate spreads increase by 20 basis points.
  - Trade with EU: tariffs increase by 4 percent in mid-2019 (mid-2020 for UK imports subject to temporary tariff regime); nontariff barriers increase by additional 14 percent (tariff-equivalent) relative to baseline.
  - Border disruption: No; Tightening of financial conditions: Small.
- Scenario B (significant border disruptions; larger financial tightening):
  - UK sovereign spreads increase by 100 basis points; UK corporate spreads increase by 150 basis points.
  - Additional temporary spillovers: corporate spreads increase by 25 basis points in the EU and 15 basis points in the rest of the world.
  - Border disruption: Yes; Tightening of financial conditions: More severe.
- Short- to medium-term results (Scenario A outcomes reported):
  - United Kingdom: total negative effect on UK GDP about 3.5 percent by 2021 (difference between scenario and baseline).
  - European Union: decline in activity of 0.5 percent in GDP by 2021 under Scenario A.
  - World: decline in global GDP of 0.2 percent over the same period.
- Long-term effects:
  - United Kingdom potential output: lower by almost 3 percent in the long term relative to the April 2019 WEO baseline.
  - European Union potential output: decline of about 0.3 percent in the long term.
  - World: global GDP down by 0.1 percent in the long term.

### Commodity market developments and forecasting (Chapter 2 highlights)
- IMF’s Primary Commodity Price Index declined by 6.9 percent between August 2018 and February 2019.
- Energy prices fell sharply by 17.0 percent between August 2018 and February 2019.
- Food prices increased by 1.9 percent between August 2018 and February 2019.
- Base metal prices increased by 7.6 percent between August 2018 and February 2019.
- Oil:
  - US crude oil production averaged 10.9 million barrels a day (mbd) in 2018, an increase of 1.6 mbd over the previous year and exceeding expectations by 0.3 mbd since the October WEO.
  - OPEC and non-OPEC cuts agreed on December 7, 2018: 0.8 mbd and 0.4 mbd, respectively, from October 2018 level, starting January 2019 for an initial six-month period.
  - Baseline futures-based assumption: average annual prices of $59.2 a barrel in 2019 and $59.0 a barrel in 2020 for IMF’s average petroleum spot prices.
- Metals:
  - Iron ore up 28.8 percent between August 2018 and February 2019.
  - Copper up 4.1 percent between August 2018 and February 2019.
  - Cobalt declined by 49.3 percent between August 2018 and February 2019.
  - IMF annual base metal price index projected to increase by 2.4 percent in 2019 and decrease by 2.2 percent in 2020.
- Food:
  - Wheat down 15.8 percent between August 2018 and February 2019; corn up 4.4 percent; soybeans up 5.6 percent; sugar up 23.7 percent; cotton down 14.2 percent.
  - Food prices projected to decrease by 2.9 percent in 2019 and increase by 2.1 percent in 2020.

### Commodity cycles and nowcasting power
- Commodity cycle characteristics (averages from Table 1.SF.1):
  - Energy: Expansion duration 20 months; Contraction duration 24 months; Expansion amplitude 64.72 (log difference, percent); Contraction amplitude 62.81.
  - Base Metals: Expansion duration 18 months; Contraction duration 24 months; Expansion amplitude 55.19; Contraction amplitude 57.98.
  - Food and Beverages: Expansion duration 16 months; Contraction duration 20 months; Expansion amplitude 45.25; Contraction amplitude 49.60.
  - Agricultural Raw Materials: Expansion duration 18 months; Contraction duration 22 months; Expansion amplitude 43.27; Contraction amplitude 46.70.
- Synchronization findings:
  - Agricultural prices are only modestly in sync with economic activity on average; base metals (zinc, copper, tin) are bellwethers of global industrial production.
  - Propane shows the highest synchronization with global industrial production.
- Latent factor extraction:
  - First two principal components explain about 20 percent of variance in commodity price monthly changes.
  - First factor: global factor strongly related to global GDP movements.
  - Second factor: relative-price factor (negative demand shift for agricultural products relative to energy and metals).
  - Cumulative correlation between first and second factors is 0.67.
- Nowcasting and forecasting performance (selected RMSE outcomes preserved exactly):
  - Global Industrial Production Nowcast (January 1980 to December 2018):
    - Benchmark RMSE 0.55%
    - Specification 1 RMSE 0.54%; Ratio 0.99
    - Specification 2 RMSE 0.53%; Ratio 0.97
    - Specification 3 RMSE 0.54%; Ratio 0.98
  - Global GDP Nowcast (1980:Q1 to 2018:Q3), One Month Information:
    - Benchmark RMSE 0.42%
    - Specification 1 RMSE 0.38%; Ratio 0.90
    - Specification 2 RMSE 0.37%; Ratio 0.90
    - Specification 3 RMSE 0.38%; Ratio 0.90
  - Out-of-sample recursive forecasting (2000–18 sample):
    - IP (Month ahead): Benchmark RMSE 0.55%; Specification 1 RMSE 0.50%; Ratio 0.92; Specification 2 RMSE 0.49%; Ratio 0.90.
    - GDP (Quarter information): Benchmark RMSE 0.51%; Specification 1 RMSE 0.46%; Ratio 0.91; Specification 2 RMSE 0.46%; Ratio 0.91.
- Conclusion: once idiosyncratic factors are removed, commodity prices—especially base metals and to some extent energy and agricultural products—contain substantial information useful for nowcasting and forecasting global activity, particularly during volatile periods.

### Annex: European economies (selected table highlights preserved exactly)
- Europe (aggregate):
  - Real GDP: 2.2, 1.2, 1.8
  - Consumer Prices: 3.2, 2.9, 2.8
  - Current Account Balance: 2.2, 2.2, 2.1
- Euro Area:
  - Real GDP: 1.8, 1.3, 1.5
  - Consumer Prices: 1.8, 1.3, 1.6
  - Current Account Balance: 3.0, 2.9, 2.8
- Selected country Real GDP (2018, 2019, 2020):
  - Germany: 1.5, 0.8, 1.4
  - France: 1.5, 1.3, 1.4
  - Italy: 0.9, 0.1, 0.9
  - Spain: 2.5, 2.1, 1.9
  - Netherlands: 2.5, 1.8, 1.7
  - United Kingdom: 1.4, 1.2, 1.4
  - Ireland: 6.8, 4.1, 3.4
- Emerging and Developing Europe (aggregate):
  - Real GDP: 3.6, 0.8, 2.8
  - Turkey: 2.6, –2.5, 2.5; Consumer Prices: 16.3, 17.5, 14.1

### Country-level policy recommendations and priorities (selected)
- Argentina:
  - Primary fiscal balance target envisages a 0.5 percent of GDP a year improvement.
  - More up-front adjustment needed, particularly cuts to the public wage bill and pension reforms, while protecting vital social programs for the vulnerable.
  - Monetary policy: with inflation still close to target, can stay accommodative to support aggregate demand as needed.
- Mexico:
  - Avoid delaying structural reforms; stick with medium-term fiscal consolidation plan to stabilize public debt.
  - Monetary policy: provided inflation remains subdued and expectations anchored, can stay accommodative with scope to cut rates if needed.
- Turkey:
  - Need comprehensive and credible policy mix to secure macroeconomic stability.
  - High inflation and elevated inflation expectations limit monetary policy scope.
  - Increase transparency on financial balance sheet health and address nonfinancial corporate sector stress.
- Russia:
  - Further fiscal consolidation needed over the medium term to ensure sustainability.
  - Central bank rate raised above neutral; room for monetary support if inflation does not rise.
  - Continue efforts to strengthen financial stability and banking-sector governance.
- South Africa:
  - Gradual fiscal consolidation to stabilize public debt; prioritize public wage savings and protect social outlays.
  - Expand tax base and strengthen tax administration; implement structural reforms to boost private investment and productivity.
- Low-income developing countries:
  - Strengthen monetary and macroprudential frameworks, preserve exchange rate flexibility, contain public debt while protecting vulnerable, broaden revenue base, eliminate wasteful subsidies, prioritize infrastructure, health, education, and poverty reduction.
  - Commodity exporters: reorient spending toward infrastructure and social outlays; diversify away from resource dependence.
- Multilateral policies:
  - Cooperate to preserve rule-based trading system; modernize WTO rules; safeguard postcrisis financial regulatory gains; strengthen global safety nets; multilateral cooperation on taxation, climate change mitigation/adaptation, migration, and anti-corruption.

*Source: Chapter 1, "Global Prospects and Policies," World Economic Outlook, April 2019 (chapter excerpts and tables).*

### 3.8 percent in the first half of 2018, but dropped to

### ch1 - 3.8 percent in the first half of 2018, but dropped to

### Emerging Market and Developing Economies
- China:
  - 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 softened; automobile sales declined in 2018 following the expiration of incentive programs for car purchases.
  - Export orders diminished as US tariff actions began to take hold in the second half of the year.
  - 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 weakening in import demand appeared to have impacts on trading partner exports in Asia and Europe.
- Other 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 cancellation of a planned airport for the capital and backtracking on energy and education reforms.
  - Geopolitical tensions contributed to weaker activity in the Middle East.

### Advanced Economies
- Euro area slowdown drivers:
  - Weakening consumer and business sentiment.
  - Delays associated with the introduction of new fuel emission standards for diesel-powered vehicles in Germany.
  - Fiscal policy uncertainty, elevated sovereign spreads, and softening investment in Italy.
  - Street protests that disrupted retail sales and weighed on consumption spending in France.
  - Growing concerns about a no-deal Brexit likely weighed on investment spending.
  - Exports softened considerably, in part because of weak intra-euro-area trade.
- Other advanced economies:
  - Japan: activity weakened largely due to natural disasters in the third quarter.
  - United States: momentum remained robust amid a tight labor market and strong consumption growth, but investment appeared to soften in the second half of the year.
- Common influence: high policy uncertainty from US–China trade dispute truce, Brexit negotiations, Italian budget discussions, Mexican policy changes, US federal government shutdown, and US policy on Iran.

### Softening Industrial Production and Trade
- Industrial production decelerated, particularly for capital goods (Figure 1.1).
- The slowdown was broad based, notably across advanced economies, except the United States.
- Global trade growth slowed sharply from its peak in late 2017.
- US imports from China subject to new US tariffs declined or stalled toward the end of the year following some front-loading.
  - Tariff timing noted: $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.

### Lower Commodity Prices and Subdued Inflation Pressure
- Global energy prices declined by 17 percent between the reference periods for the October 2018 and current WEO as oil prices dropped from $81 a barrel in October to $61 in February.
- Since the beginning of the year, oil prices recovered somewhat thanks to production cuts by oil-exporting countries.
- Prices of base metals increased by 7.6 percent since August as supply disruption in some metal markets more than offset subdued global demand.
- Consumer price inflation remained muted across advanced economies given the drop in commodity prices.
  - For most advanced economies, core inflation is well below central bank targets; in the United States and United Kingdom, it is close to 2 percent.
  - Wage growth has been picking up across most advanced economies (notably in the United States and United Kingdom) but remains sluggish; unit labor costs continue to be restrained.
  - Inflation expectations remain contained and, in many cases, have softened recently.
- Emerging market economies:
  - Core inflation remained below 2 percent in China as activity moderated.
  - Inflation pressure eased toward the lower bound of central bank target ranges in Indonesia (drop in commodity prices) and India (slowdown in food inflation).
  - Currency depreciations in some economies passed through to higher domestic prices, partially offsetting downward pressure from lower commodity prices.

### Financial Conditions: Marginally Tighter than in the Fall; Localized Pressures Continue
- Late 2018 tightening of financial conditions was followed by a rebound in early 2019.
- Contributing factors to late-2018 tightening: slowing global growth, less buoyant corporate earnings, market concerns about pace of Federal Reserve policy tightening, no-deal Brexit prospects, and macroeconomic stimulus/liquidity support news from China.
- Early-2019 easing reflected a shift toward more accommodative monetary policy stances by major central banks and progress in US–China trade negotiations.
- Advanced economies:
  - Financial conditions eased since the start of the year but, as of early March, were slightly tighter than in October.
  - Bond yields on 10-year US Treasury notes, German bunds, and UK gilts priced in a lower path for future policy rates and are generally 40–80 basis points below the peaks of early November 2018.
  - Italian spreads over German bunds were about 250 basis points as of late March—down from late-October/early-November peaks but remain elevated.
  - Riskier asset classes benefited from improved sentiment; equity markets in the United States and Europe regained footing; high-yield corporate spreads narrowed since December but remain wider than in October.
- Emerging market economies:
  - Financial conditions improved in early 2019 but remain somewhat tighter than in October.
  - Central banks in Chile, Indonesia, Mexico, Philippines, and South Africa have lifted policy rates since October due to concerns about inflation after oil price increases in 2018 and pass-through from prior currency depreciation.
  - In China, the central bank provided liquidity support and reduced reserve requirements for all banks.
  - Long-term sovereign yields and spreads over advanced economies are broadly back to October levels.
  - Mexico: sovereign spread widened notably in November and December on policy reversal concerns but has since narrowed.
  - Brazil: spreads have declined since October amid optimism about pension reform prospects.
  - Argentina and Turkey: spreads declined somewhat following adjustments to rein in financial imbalances but remain elevated.
  - Emerging market equity indexes recovered ground lost in late 2018 and are broadly at or have surpassed October levels in most cases.
- Exchange rates and capital flows:
  - As of late March, the US dollar was back to its September 2018 level after reversing late-2018 appreciation.
  - The euro depreciated by about 3 percent over this period; the yen appreciated modestly; the pound strengthened by about 3 percent.
  - Emerging market currencies generally strengthened, including the Argentine peso, the Turkish lira, the Brazilian real, the South African rand, the Indian rupee, and the Russian ruble; the Chinese renminbi strengthened by about 2 percent.
  - Improved sentiment was reflected in stabilization and subsequent recovery in portfolio flows to emerging markets.

*International Monetary Fund | April 2019*

### 2. Emerging Market Economies

### 2. Emerging Market Economies

### Exchange Rates, Capital Flows, and Market Sentiment
- Following a shift in market expectations about the pace and extent of US monetary policy tightening, the late-2018 appreciation of the dollar reversed and emerging market currencies generally strengthened (Figure 1.8).
- Investors increased allocations to emerging market bond and equity funds in early 2019 (Figure 1.9).
- Capital inflows/outflows and reserve changes are discussed in Figure 1.9 (net purchases by nonresidents; net purchases of foreign assets by domestic residents; change in reserves).

### Forecast: Near-Term Moderation, Then a Modest Pickup
- Industrial production figures and surveys of purchasing managers suggest slower momentum in global growth during the second half of 2018 is likely to continue in early 2019; the forecast envisages a stabilization of growth in the first half of the year and a gradual recovery thereafter (Figure 1.10).
- Global growth projections:
  - World: 3.6 percent in 2018; 3.3 percent in 2019; 3.6 percent in 2020.
  - The forecast for 2019 is 0.4 percentage point lower than in the October 2018 WEO; the forecast for 2020 is 0.1 percentage point lower.
- Advanced economies:
  - 2.2 percent in 2018; 1.8 percent in 2019; 1.7 percent in 2020.
  - Slowdown in advanced economies accounts for over two-thirds of the expected deceleration in global growth relative to 2018.
- Emerging Market and Developing Economies:
  - 4.5 percent in 2018; 4.4 percent in 2019; 4.8 percent in 2020.
  - The 2019 projection is 0.3 percentage point lower than in the October 2018 WEO.

### Key Country and Region Projections (selected figures from Table 1.1)
- United States: 2.9 percent in 2018; 2.3 percent in 2019; 1.9 percent in 2020.
- Euro Area: 1.8 percent in 2018; 1.3 percent in 2019; 1.5 percent in 2020.
- Germany: 1.5 percent in 2018; 0.8 percent in 2019; 1.4 percent in 2020.
- Japan: 0.8 percent in 2018; 1.0 percent in 2019; 0.5 percent in 2020.
- China: 6.6 percent in 2018; 6.3 percent in 2019; 6.1 percent in 2020.
- India: 7.1 percent in 2018; 7.3 percent in 2019; 7.5 percent in 2020.
- Emerging and Developing Asia: 6.4 percent in 2018; 6.3 percent in 2019; 6.3 percent in 2020.
- Latin America and the Caribbean: 1.0 percent in 2018; 1.4 percent in 2019; 2.4 percent in 2020.
- Brazil: 1.1 percent in 2018; 2.1 percent in 2019; 2.5 percent in 2020.
- Mexico: 2.0 percent in 2018; 1.6 percent in 2019; 1.9 percent in 2020.
- Russia: 2.3 percent in 2018; 1.6 percent in 2019; 1.7 percent in 2020.
- Saudi Arabia: 2.2 percent in 2018; 1.8 percent in 2019; 2.1 percent in 2020.
- Sub-Saharan Africa: 3.0 percent in 2018; 3.5 percent in 2019; 3.7 percent in 2020.
- South Africa: 0.8 percent in 2018; 1.2 percent in 2019; 1.5 percent in 2020.

### Drivers, Assumptions, and Risks
- Baseline assumptions include tariffs on $200 billion of US imports from China remaining at 10 percent (rather than rising to 25 percent as previously assumed).
- Beyond 2020, global growth is projected to plateau at about 3.6 percent over the medium term.
- Fiscal policy assumptions:
  - Fiscal policy is assumed to be expansionary across advanced economies in 2019 and expected to turn contractionary in 2020 as the US stimulus starts going into reverse.
  - Across emerging market and developing economies, fiscal policy is assumed to be expansionary in 2019 (in part reflecting a projected fiscal stimulus in China), before turning contractionary in 2020.
- Commodity price assumptions and projections:
  - Based on oil futures contracts, average oil prices are projected at $54.1 in 2019, rising to $55.2 in 2020.
  - Metal prices are expected to decline 6.0 percent year over year in 2019 and decline a further 0.8 percent in 2020.
  - Food prices are projected to decline 2.6 percent year over year in 2019 before increasing by 1.7 percent in 2020.
- Near-term risks for emerging market and developing economies include:
  - Interaction of country-specific fundamentals with a challenging external environment (slowdown in advanced economies; trade tensions; expected gradual tightening of financial conditions in the United States).
  - For commodity exporters, a generally subdued outlook for commodity prices.
  - Country-specific distress in some economies (recession in Turkey; deepening contraction in Iran) that weigh on group aggregate growth.

### Regional and Country Dynamics for Emerging Markets
- The decline in emerging market and developing economy growth relative to 2018 reflects lower growth in China, the recession in Turkey, carryover from weaker activity in late 2018, and contraction in Iran.
- Conditions are projected to improve in 2019 as:
  - Stimulus measures sustain activity in China.
  - Recession strains gradually ease in economies such as Argentina and Turkey.
  - Growth in 2020 is projected to rise to 4.8 percent, driven largely by expected strengthening in economies undergoing policy adjustment and easing of strains in countries affected by conflict and geopolitical tensions.
- India: growth projected to pick up to 7.3 percent in 2019 and 7.5 percent in 2020, supported by recovery of investment, robust consumption, a more expansionary stance of monetary policy, and some expected fiscal impetus; recent national account revisions imply somewhat softer underlying momentum and modest downward revisions relative to the October 2018 WEO.

*Source: Chapter 1, "Global Prospects and Policies," World Economic Outlook, April 2019 (figures and tables cited within the chapter).*

### 0.2 percentage point for 2020, respectively.

### ch1 - 0.2 percentage point for 2020, respectively.

### Regional near-term outlook
- Emerging and developing Europe
  - Activity in 2019 is expected to weaken more than previously anticipated before recovering in 2020.
  - A sizable revision for the region is mostly due to a substantial projected contraction in Turkey in 2019, with weakness in demand following tighter external financing conditions and needed policy tightening expected to continue in early 2019 before a recovery takes hold in the second half of the year.
- Latin America
  - Growth is projected to recover to 1.4 percent in 2019 and 2.4 percent in 2020.
  - Brazil: growth projected to strengthen from 1.1 percent in 2018 to 2.1 percent in 2019 and 2.5 percent in 2020.
  - Mexico: growth is now forecast to remain below 2 percent in 2019–20, a markdown close to 1 percentage point for both years relative to October.
  - Argentina: economy projected to contract in the first half of 2019 as domestic demand slows with tighter policies, returning to growth in the second half of the year as real disposable income recovers and agricultural production rebounds after last year’s drought.
  - Venezuela: economy expected to contract by one-fourth in 2019, and a further 10 percent in 2020.
- Middle East, North Africa, Afghanistan, and Pakistan (MENAP)
  - Growth expected to decline to 1.5 percent in 2019 before recovering to about 3.2 percent in 2020.
  - Downside factors include slower oil GDP growth in Saudi Arabia; ongoing macroeconomic adjustment challenges in Pakistan; US sanctions in Iran; and civil tensions and conflict in Iraq, Syria, and Yemen.
- Sub-Saharan Africa
  - Growth expected to pick up to 3.5 percent in 2019 and 3.7 percent in 2020 (from 3.0 percent in 2018).
  - The projection is 0.3 percentage point and 0.2 percentage point lower for 2019 and 2020, respectively, than in the October 2018 WEO, reflecting downward revisions for Angola and Nigeria with the softening of oil prices.
  - South Africa: growth expected to marginally improve from 0.8 percent in 2018 to 1.2 percent in 2019 and 1.5 percent in 2020, a 0.2 percentage point downward revision for both years relative to the October projections.
- Commonwealth of Independent States (CIS)
  - Activity projected to expand about 2¼ percent in 2019–20, slightly lower than projected in the October 2018 WEO, as weaker oil prices weigh on Russia’s growth prospects.

### Medium-term growth projections (beyond 2020)
- Global and group-level projections
  - Global growth is set to plateau at 3.6 percent over the medium term.
  - Advanced economies: growth projected to slow to 1.6 percent by 2022 and remain at that level thereafter.
  - Emerging market and developing economies (EMDEs): growth projected to stabilize at about 4.8 percent over the medium term.
  - Emerging market and developing economies’ share of global growth projected to increase from 76 percent in 2019 to about 85 percent in 2024.
- Drivers and assumptions for EMDEs
  - Continued strong investment growth in EMDEs, accounting for more than one-third of their GDP growth rate during the projection horizon.
  - Assumptions include a smooth trajectory for drivers of capital spending; a gradual tightening in financial conditions; quick resolution of trade disagreements and easing of trade tensions; and broader policy actions to reduce uncertainty.
- Regional medium-term specifics
  - Emerging Asia: growth expected to remain above 6 percent through the forecast horizon.
    - China: gradual slowdown to 5.5 percent by 2024 as internal rebalancing continues and regulatory tightening slows debt accumulation.
    - India: growth expected to stabilize at just under 7¾ percent over the medium term.
  - Latin America: growth projected to increase from 2.4 percent in 2020 to 2.8 percent over the medium term.
    - Argentina: projected to strengthen to about 3½ percent over the medium term.
    - Brazil and Mexico: projected growth in the range of 2¼–2¾ percent.
  - Emerging Europe: projected to grow just above 3 percent over the medium term.
    - Turkey: projected to return to positive annual growth in 2020 and pick up to 3.5 percent over the medium term.
    - Poland and Romania: growth expected to moderate to about 3 percent over the medium term.
  - CIS: growth to stabilize at 2.4 percent over the medium term, reflecting Russia’s sluggish growth of about 1½ percent.
  - Sub-Saharan Africa: regional growth projected to increase from 3.7 percent in 2020 to about 4 percent in 2024.
    - Nigeria and Angola: medium-term growth expected to reach about 2.6 percent and 3.9 percent, respectively.
    - South Africa: projected to stabilize at 1¾ percent over the medium term.
  - MENAP: medium-term growth shaped by fuel price outlook, needed macroeconomic adjustments, and geopolitical tensions.
    - Saudi Arabia: expected to stabilize at about 2¼–2½ percent.
    - Pakistan: in the absence of further adjustment, growth projected to remain subdued at about 2.5 percent.

### Convergence and distributional concerns
- Convergence prospects are bleak for some EMDEs.
  - Across sub-Saharan Africa and MENAP, 41 economies (accounting for close to 10 percent of global GDP in purchasing-power-parity terms and close to 1 billion in population) are projected to grow by less than advanced economies in per capita terms over the next five years.
  - Substantial heterogeneity exists in per capita growth rates within sub-Saharan Africa; for close to two-fifths of economies, the average growth rate over the medium term is projected to exceed 5 percent.

### Inflation outlook
- Advanced economies
  - Inflation projected to decline to 1.6 percent this year from 2.0 percent in 2018.
  - US: core inflation expected to exceed the medium-term target of 2.0 percent this year and next, then decline to target thereafter.
  - Euro area: core inflation expected to gradually increase from 1.2 percent in 2018 to about 2 percent in 2022.
  - Japan: core inflation (excluding fresh food and energy) projected to rise to 1.4 percent by the end of 2020 as the consumption tax rate is raised in October this year, softening back to about 1.3 percent in the medium term.
- Emerging market and developing economies (excluding Venezuela)
  - Inflation expected to firm to 4.9 percent this year from 4.8 percent in 2018, reflecting a temporary boost in some economies.
    - Contributing factors: higher value-added tax rate in Russia; gradual pickup in price pressure in India; still-elevated inflation expectations in Argentina during an adjustment to a new anchoring regime.
  - Inflation set to moderate to about 4 percent over the medium term as temporary effects fade and growth stabilizes.

### External sector outlook
- Trade growth
  - Global trade growth slowed considerably in 2018; further slowdown expected in 2019 with some recovery in 2020.
  - In subsequent years, trade growth projected to continue at broadly the same pace as in 2018 as investment demand gradually recovers in EMDEs, offsetting slowdown in capital spending in advanced economies.
- Current account positions
  - Global current account deficits and surpluses estimated to have widened marginally in 2018 compared with the previous year, largely driven by higher oil prices.
  - Higher oil prices estimated to have boosted the current account balance of oil exporters by about 3½ percent of their GDP.
  - China’s current account surplus declined to 0.4 percent of GDP; US current account deficit unchanged at 2.3 percent; euro area surplus declined marginally to 3.0 percent.
  - Forecasts for 2019 and beyond indicate a gradual reduction in global current account deficits and surpluses, particularly after 2020.
  - The surplus of oil exporters will fall as average oil prices are projected to drop from their 2018 level.
  - The United States current account balance projected to widen in 2019–20—driven by expansionary fiscal policy—and to narrow thereafter.
  - Recently imposed trade measures and retaliatory actions expected to have limited impact on overall external imbalances.
- Adjustment of excess current account balances
  - Excess current account balances in 2018 are estimated to have declined, supported in many cases by real exchange rate movements.
  - The change in the current account balance during 2018 is estimated to have offset, on average, about one-fifth of the 2017 current account gap; the change between 2017 and 2024 would offset less than half of the 2017 gap.

*Source: IMF staff estimates, World Economic Outlook: Growth Slowdown, Precarious Recovery (April 2019), Chapter 1.*

### CHAPTER 1

### CHAPTER 1

### International Investment Positions
- Changes in international investment positions reflect both net financial flows and valuation changes arising from fluctuations in exchange rates and asset prices.
- WEO projections assume broadly stable real effective exchange rates and limited variation in asset prices; therefore, changes in international investment positions are driven by projections for net external borrowing and lending (in line with the current account balance), with their ratios to domestic and world GDP affected by projected growth rates for individual countries and for the global economy.
- WEO forecasts include projections of 10-year government bond yields, but the impact of those changes in bond prices on the valuation of external assets and liabilities is typically not included in international investment position forecasts.
- The decline in global equity prices in late 2018 (compared with their levels at the end of 2017) implies deterioration of international investment positions at the end of 2018 in countries with significant net holdings of equity and foreign direct investment abroad and a corresponding improvement in positions for countries with net equity liabilities.
- Creditor and debtor positions as a share of world GDP are projected to widen slightly in 2019 and then broadly stabilize as a share of world GDP over the forecast horizon.
- Projected regional and country positions (percent of GDP) by 2024:
  - Net creditor position of advanced European economies: above 80 percent of GDP.
  - Net creditor position of Japan: to exceed 65 percent of GDP.
  - Net creditor position of China: decline to below 10 percent of GDP.
  - Debtor position of the United States: projected to approach 50 percent of GDP, some 9 percentage points above the 2017 estimate.
  - Net international investment position of a group of euro area debtor countries (including Italy and Spain): expected to improve by more than 25 percentage points of their collective GDP.
  - By 2024, net foreign liabilities (for the referenced group) would be about 32 percent of their GDP, half what they were a decade earlier.
- Excess current account balances in 2018 are estimated to have declined, supported in many cases by real exchange rate movements. Medium-term projections suggest, on average, further movement of current account balances in the same direction.

### Implications of Imbalances
- Sustained excess external imbalances in key economies and policy actions that threaten to widen such imbalances pose risks to global stability.
- The fiscal easing under way in the United States is projected to increase the US current account deficit, which could:
  - Aggravate trade tensions.
  - Result in a faster tightening of global financing conditions with negative implications for emerging market economies, especially those with weak external positions.
- Over the medium term, widening debtor positions in key economies could constrain global growth and possibly result in sharp and disruptive currency and asset price adjustments.
- Policy guidance:
  - The US economy—which is already operating beyond full employment—should implement a medium-term plan to reverse the rising ratio of public debt, accompanied by fiscal measures to gradually boost domestic capacity.
  - Stronger reliance on demand growth in some creditor countries, especially those with policy space (such as Germany), would help facilitate domestic and global rebalancing while sustaining global growth over the medium term.

### Risks: Skewed to the Downside
- The baseline outlook envisages global growth stabilizing in the first half of 2019 and recovering gradually thereafter; however, the balance of risks remains skewed to the downside.
- Key sources of downside risk:
  - Trade tensions:
    - November 30, 2018: signing of the US-Mexico-Canada Agreement.
    - Extension past March 1, 2019, of the truce between the United States and China on tariff increases.
    - Announced reduction in Chinese tariffs on US car imports.
    - Remaining risks include unresolved US–China negotiations, domestic ratification processes for the US-Mexico-Canada Agreement, and a proposal in the United States to raise tariffs on all imported cars and car parts.
    - Failure to resolve differences and increases in tariff barriers beyond what is incorporated into the forecast would raise costs of imported intermediate and capital goods, increase final goods prices, reduce business investment, disrupt supply chains, slow productivity growth, and depress corporate profitability and financial market sentiment.
  - Downside risks in systemic economies:
    - Europe: A protracted period of elevated yields in Italy could stress Italian banks, weigh on activity, and worsen debt dynamics; a no-deal Brexit or delayed progress on strengthening euro area architecture could raise risk aversion and risk spreads.
    - United States: Market-implied expected policy rates remain below the Federal Open Market Committee’s projections, raising the possibility of a market reassessment that could lead to higher US interest rates, renewed dollar appreciation, and tighter financial conditions for emerging market and developing economies with balance sheet vulnerabilities. The US credit cycle is at an advanced stage, with a rising share of lower-rated issuers, growing volume of covenant-lite loans, and elevated risks if US growth weakens.
    - China: Authorities responded to the 2018 slowdown with cuts in bank reserve requirements and tax reductions for SMEs; however, failure of trade tensions to ease or excessive stimulus that loosens credit standards could heighten financial vulnerabilities and reduce future policy space.
  - Other financial vulnerabilities: Cyberattacks on financial infrastructure; reversals of postcrisis regulatory reform; continued accommodative financial conditions that foster search-for-yield behaviors.
  - Political uncertainty: Policy uncertainty about new administrations or elections, geopolitical conflict in the Middle East, and tensions in east Asia could depress investment and growth; sequences of such events combined with trade tensions and tighter financial conditions could have outsized effects on sentiment.
  - Medium-term risks: Climate change impacts (IPCC reported in October 2018 that global warming could reach 1.5°C above preindustrial levels between 2030 and 2052) and declining trust in establishment institutions could impede structural reform implementation and raise medium-term downside risks.

### Fan Chart and Growth-at-Risk Analysis
- Fan chart analysis—based on equity and commodity market data and the dispersion of inflation and term spread projections of private forecasters—shows a downward shift in the balance of risks relative to the April 2018 WEO.
- The worsening profile mostly reflects the anticipated drag associated with the risk of oil prices rebounding sharply from their recent rapid drop.
- Growth-at-risk analysis suggests slightly higher near-term downside risks to global financial stability compared with the October 2018 report and continued elevated risks to medium-term growth.

### Policy Priorities: Enhance Resilience, Raise Medium-Term Growth Prospects
- Main priorities:
  - Avoid policy missteps that could harm economic activity.
  - Macroeconomic and financial policy should guard against further deceleration where output may fall below potential and ensure a soft landing where policy support needs to be withdrawn.
  - Monetary policy: aim to keep inflation on track toward the central bank’s target and keep inflation expectations anchored.
  - Fiscal policy: manage trade-offs between supporting demand and ensuring public debt remains on a sustainable path; calibrate the pace of fiscal consolidation to secure stability without suppressing near-term growth or harming programs that protect the vulnerable.
  - Financial sector policies: strengthen resilience against financial vulnerabilities (see April 2019 Fiscal Monitor and April 2019 GFSR references in the source text).

*Source: CHAPTER 1 — GLOBAL PROSPECTS AND POLICIES, International Monetary Fund | April 2019*

### 2. Balance of Risks Associated with Selected Risk Factors

### 2. Balance of Risks Associated with Selected Risk Factors

### Uncertainty around the WEO baseline and risk measurement
- The fan chart depicts uncertainty around the April 2019 WEO central forecast with 50, 70, and 90 percent confidence intervals (the 70 percent interval includes the 50 percent interval, and the 90 percent interval includes the 50 and 70 percent intervals).
- The 90 percent intervals for the current-year and one-year-ahead forecasts from the April 2018 WEO are shown for comparison.
- The bars depict the coefficient of skewness expressed in units of the underlying variables; values for inflation risks and oil market risks enter with the opposite sign since they represent downside risks to growth.
- Dispersion and volatility indicators included: GDP (purchasing-power-parity-weighted average dispersion of GDP growth forecasts for the Group of Seven, Brazil, China, India, and Mexico), VIX (CBOE S&P 500 Implied Volatility Index), term spread (average dispersion of term spreads implicit in interest rate forecasts for Germany, Japan, the United Kingdom, and the United States), and Oil (CBOE crude oil volatility index). Forecasts are from Consensus Economics surveys; dashed lines represent averages from 2000 to the present.

### WEO baseline summary and overall balance of risks
- The balance of risks to the outlook has shifted downward relative to the April 2018 World Economic Outlook.
- If the current slowdown turns more severe and protracted than envisaged in the baseline, the macroeconomic policy stance should become more accommodative, particularly where output already is or could fall below potential and where there is policy space.
- Beyond 2020, the forecast of broadly stable growth at 3.6 percent depends importantly on weights shifting toward those with relatively higher growth rates.
- Policy priorities across countries include boosting medium-term growth prospects and strengthening revenue bases for social and infrastructure spending to preserve poverty reduction, inclusiveness, and debt sustainability.

### Advanced economies — findings and policy priorities
- Consumer price inflation generally remains below target and wage pressures are relatively subdued in many advanced economies.
- Monetary policy recommendation: stay accommodative until inflation shows clear signs of rising toward central banks’ targets.
- Fiscal policy recommendation: emphasize measures that boost potential output and raise inclusiveness while maintaining public finances on a sustainable path.
- For countries with high public debt: pursue gradual fiscal consolidation that avoids sharp drags on growth and secures adequate social insurance for the vulnerable, unless a substantially deeper slowdown materializes (in which case both monetary and fiscal policy should become more accommodative).
- Financial stability: raise bank capital and liquidity buffers, enhance macroprudential oversight of nonbank financial institutions, develop macroprudential tools as needed, and avoid rolling back postcrisis regulatory reforms.
- Medium-term potential output growth rates are estimated in the range of 0.5–1.5 percent for most advanced economies; policy measures to raise labor force participation and productivity are called for (public investment, lifelong learning, R&D, competition policy).

Specific country guidance:
- United States:
  - The Federal Reserve’s patient approach to normalization is appropriate given uncertainty and muted inflation.
  - Under the WEO baseline, labor markets expected to tighten further and wage growth to pick up, likely warranting a further rate hike in the second half of the year.
  - Fiscal policy should focus on raising the revenue-to-GDP ratio, with greater reliance on indirect taxes to counteract anticipated rise in aging-related spending.
  - Preserve and strengthen the current risk-based approach to regulation, supervision, and resolution (strengthen further for nonbank financial institutions).
- United Kingdom:
  - Cautious, data-dependent monetary response warranted given Brexit uncertainty.
  - Pace of fiscal consolidation (aim to narrow cyclically adjusted public sector deficit to below 2 percent of GDP by 2020–21) should be adjusted if growth slows materially.
  - Structural reforms: improve infrastructure quality, boost basic skills of high school graduates, and ensure labor redeployment across sectors affected by Brexit.
- Euro area:
  - Core inflation remains well below target; monetary policy should remain accommodative.
  - Forward guidance to reinvest maturing securities until well after first rate hikes is welcome.
  - Fiscal space varies; in some countries (France, Italy, Spain) buffers should be rebuilt gradually. In Germany, available fiscal space can be used to increase public investment or reduce the labor tax wedge.
  - If a severe downside scenario materializes, monetary tools could be complemented with fiscal easing by countries with appropriate fiscal space; a synchronized but differentiated fiscal response can strengthen area-wide impact.
  - Completing the banking union and continuing balance sheet cleanup remain vital.
  - Country-specific structural priorities: France (reduce corporate administrative burdens, promote innovation, strengthen competition in services, improve labor market flexibility), Italy (decentralize wage bargaining), Spain (reduce labor market duality).
- Japan:
  - Sustained monetary accommodation necessary to lift inflation expectations and progress toward the central bank’s target.
  - Fiscal policy should ensure long-term fiscal sustainability while protecting growth; planned October consumption tax increase coupled with fiscal measures to support near-term activity is welcome.
  - Sustainable debt trajectory calls for further gradual and steady increases in the consumption tax rate and reforms of the social security framework.
  - Reforms to lift productivity and wage inflation: reduce labor market duality, raise female labor force supply, encourage more use of foreign labor.

### Emerging market and developing economies — findings and policy priorities
- Policy frameworks should secure growth prospects and strengthen resilience amid volatile external conditions.
- Monetary policy: anchor inflation expectations where inflation is high or currency depreciation threatens pass-through; where expectations are well anchored, monetary policy can support domestic activity.
- Fiscal policy: ensure debt ratios remain sustainable to contain borrowing costs and create space to combat downturns; improve targeting of subsidies, rationalize recurrent expenditures, and mobilize revenue to preserve capital outlays and social spending.
- Macroprudential frameworks: strengthen where needed to deal with high private debt burdens, rein in excess credit growth, and contain currency and maturity mismatches.
- Exchange rate flexibility: can help buffer shocks and prevent persistent misalignments that lead to resource misallocation and financial imbalances.
- Structural reforms remain essential given relatively subdued medium-term per capita growth prospects in many economies in this group.

Country-specific guidance:
- China:
  - Reliance on credit has declined somewhat after regulatory efforts to rein in shadow banking and control debt buildup.
  - Policies should continue to focus on deleveraging and rebalancing away from credit-fueled investment toward private consumption-led growth.
  - Reducing leverage requires scaling back implicit guarantees, early recognition and disposal of distressed assets, and fostering more market-based credit allocation.
  - Private consumption share of GDP increased to up close to 40 percent in 2017 from 35 percent in 2012.
  - Rebalancing also requires a more progressive tax code; higher spending on health, education, and social transfers; and reduced barriers to labor mobility.
  - Enhance productivity by reducing state-owned enterprise footprint and lowering barriers to entry in sectors such as telecommunications and banking.
  - To avoid a sharp near-term slowdown that could derail reforms, some centrally financed on-budget fiscal expansion in 2019 may be appropriate, avoiding large-scale infrastructure stimulus and emphasizing targeted transfers to low-income households.
- India:
  - Continued implementation of structural and financial sector reforms and efforts to reduce public debt remain essential.
  - Near-term fiscal consolidation needed to bring down India’s elevated public debt; strengthen goods and services tax compliance and reduce subsidies.
  - Financial sector: accelerate resolution of nonperforming assets under simplified bankruptcy framework and enhance governance of public sector banks.
  - Structural reforms: hiring and dismissal regulation reform to incentivize job creation and absorb demographic dividend; enhance land reform to facilitate infrastructure development.
- Argentina:
  - Projections for growth have been revised upward; higher nominal wages and rising inflation expectations expected to generate more persistent inflationary pressures in 2019 than in the October 2018 WEO.
  - Downside risks are sizable and could shift investor preferences away from peso assets, pressuring the currency and capital account.
  - Continued implementation of the stabilization plan under the IMF-supported program is crucial.
  - Meeting the primary fiscal balance target of zero in 2019 and 1 percent of GDP in 2020 is essential to bring down financing needs and avoid reigniting liquidity pressures.
  - Continued achievement of monetary targets is crucial to re-anchor inflation expectations and rebuild central bank credibility.
  - Resume structural reform agenda to lift medium-term growth prospects.
- Brazil:
  - Main priority is to contain rising public debt while ensuring needed social spending remains intact.
  - (Text continues beyond the provided excerpt for further Brazil recommendations.)

*Source: ch1 - 2. Balance of Risks Associated with Selected Risk Factors (April 2019, World Economic Outlook chapter).*

### CHAPTER 1

### CHAPTER 1

### Country-level policy recommendations and findings
- Argentina
  - The primary fiscal balance target envisages a 0.5 percent of GDP a year improvement.
  - More up-front adjustment is needed, particularly cuts to the public wage bill and pension reforms, while protecting vital social programs for the vulnerable.
  - With inflation still close to target, monetary policy can stay accommodative to support aggregate demand as needed.
  - Improve infrastructure and the efficiency of financial intermediation to lift productivity and boost medium-term growth prospects.

- Mexico
  - Sovereign spreads have widened significantly since October.
  - Essential to avoid delaying needed structural reforms to prevent additional uncertainty detrimental to private investment and employment growth.
  - Stick with the medium-term fiscal consolidation plan (and possibly aim for an even larger reduction in the deficit) to stabilize public debt, lift confidence, and create space to respond to shocks and accommodate aging-related spending needs.
  - Provided inflation remains subdued and expectations well anchored, monetary policy can stay accommodative with scope to cut rates if needed.

- Turkey
  - The New Economic Program provides a framework, but a comprehensive and credible policy mix is needed to secure macroeconomic stability.
  - Pace of fiscal consolidation should be appropriately calibrated given the subdued outlook.
  - High inflation and elevated inflation expectations limit scope for monetary policy to support activity.
  - Rationalize spending channeled through public-private partnerships and increase transparency to underpin the fiscal anchor.
  - Increase transparency about financial balance sheet health and strengthen balance sheets where needed.
  - Address nonfinancial corporate sector stress, including debt vulnerabilities.

- Russia
  - Recent revision of the fiscal rule delivered a procyclical positive fiscal impulse and could weaken policy credibility.
  - Further fiscal consolidation will be needed over the medium term to ensure sustainability.
  - The central bank policy rate has been raised above the neutral rate following higher inflation pressure in the second half of 2018.
  - Provided inflation does not rise, there is room to provide monetary support should activity weaken in the near term.
  - Continue efforts to strengthen financial stability (including closure of weak banks and reforms to the resolution framework).
  - Enhance structure and governance of the banking system to improve efficiency of credit intermediation.
  - Continue reforms to property rights and governance, labor markets, and infrastructure to boost private investment and productivity growth.

- South Africa
  - Gradual fiscal consolidation will be needed to stabilize the public debt.
  - Public wage savings should be prioritized to preserve vital social outlays for the vulnerable and fund productive investment to boost potential growth.
  - Make transfers to public entities contingent on downsizing and eliminating wasteful spending.
  - Support consolidation by expanding the tax base and strengthening tax administration and anti-tax-avoidance provisions to reduce profit shifting.
  - Implement structural reforms, particularly to product and labor markets, to expand private investment, job creation, and productivity growth.

### Low-income developing countries (including commodity exporters)
- Shared priorities with emerging markets: raise resilience to volatile external conditions.
- Recent tightening: Several low-income “frontier” economies have seen external financing conditions tighten sharply in recent months.
- Policy priorities:
  - Strengthen monetary and macroprudential policy frameworks while preserving exchange rate flexibility.
  - Contain the buildup of public debt while protecting measures that help the vulnerable and support progress toward the Sustainable Development Goals.
  - Broaden the revenue base and strengthen tax administration.
  - Eliminate wasteful subsidies.
  - Prioritize spending on infrastructure, health, education, and poverty reduction.
- Commodity-exporting developing economies face additional pressure from a subdued outlook for commodity prices.
  - Reorient spending toward infrastructure and social outlays.
  - Boost domestic revenue mobilization by broadening the tax base and strengthening revenue administration.
  - Diversify away from dependence on resource extraction and refining through sound macroeconomic management, improving education quality and worker skills, reducing infrastructure shortfalls, boosting financial development and inclusion, and incentivizing private investment (by strengthening property rights, contract enforcement, and reducing barriers to trade).
- Climate change and natural disasters:
  - Invest in climate-smart infrastructure, incorporate appropriate technologies and zoning regulations, and deploy well-targeted social safety nets to lower the fallout.

### Multilateral policies and global public goods
- Trade
  - Cross-border integration through trade openness has been a critical source of productivity growth, knowledge diffusion, and welfare gains.
  - Policymakers should cooperate to address dissatisfaction with the rule-based trading system, reduce trade costs, and resolve disagreements without raising tariff and non-tariff barriers.
  - Modernize WTO rules to address services, e-commerce, subsidies, and technology transfer; urgently resolve the impasse over the WTO’s Appellate Body.
  - Well-designed regional arrangements (example given: Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the EU-Japan Economic Partnership Agreement) can help.
  - Revisit the idea that all countries need to participate in all negotiations to allow willing countries to move further and faster while keeping agreements inside the WTO and open to all members.

- Global financial stability
  - Global cooperation is needed to safeguard postcrisis financial regulatory gains and resist rolling back reforms.
  - Fully implement reforms such as the leverage ratio and net stable funding ratio; devise effective resolution frameworks; enhance supervisory intensity for globally important financial institutions, especially across borders.
  - Bolster macroprudential tools and policymaking capabilities; mitigate systemic risk from nonbank financial institutions by monitoring the regulatory perimeter and filling data gaps.
  - Coordinate to confront emerging risks from central counterparties, cybersecurity breaches, and to combat cross-border money laundering and financing of terrorism.
  - An adequately financed global safety net can protect economies with robust fundamentals vulnerable to cross-border contagion when downside risks are elevated.
  - Limiting withdrawal of correspondent banking relationships is vital for low-income countries’ access to international payment systems.

- Taxation
  - Multilateral cooperation is needed to tackle tax evasion and avoidance and to mitigate international tax competition.
  - Reinforce efforts such as the Organisation for Economic Co-operation and Development–Group of Twenty Base Erosion and Profit Shifting initiative.

- Longer-term global challenges
  - Curb greenhouse gas emissions and implement climate change mitigation and adaptation strategies.
  - Migration: international cooperation can streamline integration of migrants to maximize labor supply and productivity benefits and support remittance flows.
  - Curb corruption through global effort to protect faith in government and institutions.

### Scenario Box 1.1 — A No-Deal Brexit: model setup and common assumptions
- Model: IMF’s Global Integrated Monetary and Fiscal model used to explore UK withdrawal from the EU without a free trade deal in the second quarter of 2019.
- Two scenarios presented to provide a range of possible outcomes; both include measures already in place or announced to lower the short-term impact (temporary tariff exemptions on a large share of UK imports and temporary recognition regimes for some financial services).
- Both scenarios compared to the April 2019 WEO baseline, which assumes:
  - The United Kingdom leaves the European Union’s customs union and single market and reaches a broad free trade agreement with the European Union, with a gradual transition to the new regime.
- Common assumptions across scenarios:
  - Trade costs with European Union (tariffs): Under a no-deal Brexit, UK exports to the European Union revert to MFN rules, with tariffs increasing by mid-2019 as a result.
    - Imports from the European Union not subject to the temporary tariff regime also revert to MFN rules in mid-2019, while those subject to the regime revert in mid-2020.
  - Trade costs with European Union (nontariff barriers): Assume an increase in nontariff trade costs reflecting a customs and regulatory border and loss of passporting rights for the UK financial sector.
    - Most of the increase in nontariff costs on the EU side takes place in the first year, with some services exemptions increasing in the second year.
    - On the UK side, a gradual three-year transition reflecting temporary recognition of EU standards in multiple areas.
    - Overall, the reduction in nontariff barriers gained from the United Kingdom’s EU membership—about 20 percent in tariff-equivalent terms—is eventually reversed.
  - Trade costs with countries outside the European Union: The United Kingdom loses most third-country free trade agreements in place through its EU membership (covering about 15 percent of all UK trade).
    - UK exports to those countries revert to MFN rules for two years starting in mid-2019; UK imports do so either in mid-2019 or in mid-2020, depending on the temporary tariff regime.
    - Scenarios assume new trade agreements are secured after two years on terms similar to those currently in place.
  - Stricter immigration policies:
    - Both scenarios assume a reduction in the net migration flow from the European Union to the United Kingdom of 25,000 people per year until 2030, in line with the UK government’s intention to reduce net immigration.
    - For simplicity, assume the net flow of migrants to the European Union increases by a similar amount.

### Differences between Scenario A and Scenario B (No-Deal Brexit)
- Scenario A
  - Assumes no border disruptions.
  - Assumes a relatively small increase in UK sovereign and corporate spreads.
  - In the Scenario Table:
    - Trade with third countries: The United Kingdom sets tariffs unilaterally to zero on 87 percent of its imports from mid-2019 to mid-2020; the United Kingdom loses access to most existing agreements, secures new agreements by 2021.
    - Trade with the European Union: Tariffs increase by 4 percent in mid-2019 (mid-2020 for UK imports subject to temporary tariff regime); nontariff barriers increase gradually by an additional 14 percent (in tariff equivalent terms) relative to baseline.
    - Border disruption: No
    - Tightening of financial conditions: Small

- Scenario B
  - Incorporates significant border disruptions that increase import costs for UK firms and households and a more severe tightening in financial conditions.
  - In the Scenario Table:
    - Trade with third countries: The United Kingdom sets tariffs unilaterally to zero on 87 percent of its imports from mid-2019 to mid-2020; the United Kingdom loses access to most existing agreements, secures new agreements by 2021.
    - Trade with the European Union: Tariffs increase by 4 percent in mid-2019 (mid-2020 for UK imports subject to temporary tariff regime); nontariff barriers increase gradually by an additional 14 percent (in tariff equivalent terms) relative to baseline.
    - Border disruption: Yes
    - Tightening of financial conditions: More severe

- Note: Scenario A assumes no border disruptions to illustrate the contribution of border disruptions by contrast with Scenario B. Scenario B models delays in the customs-clearing process despite preparatory measures, raising import costs for firms and households in the United Kingdom, and to a lesser extent in the European Union.

*Source: CHAPTER 1, WORLD ECONOMIC OUTLOOK: GROWTH SLOWDOWN, PRECARIOUS RECOVERY, International Monetary Fund | April 2019.*

### 1.4 percent and 0.8 percent and a decline in EU GDP

### ch1 - 1.4 percent and 0.8 percent and a decline in EU GDP

### Scenario design and financial conditions
- Fragment from source: "1.4 percent and 0.8 percent and a decline in EU GDP of 0.2 percent and 0.1 percent."
- Two alternative no-deal Brexit scenarios (Scenario A and Scenario B) incorporate border disruption costs, higher trade barriers, and financial tightening lasting through the second half of 2020.
- Calibration of tightening in Scenario A:
  - UK sovereign spreads increase by 12.5 basis points.
  - UK corporate spreads increase by 20 basis points.
  - No tightening of financial conditions in the European Union or the rest of the world.
- Calibration of tightening in Scenario B (larger border disruption costs):
  - UK sovereign spreads increase by 100 basis points.
  - UK corporate spreads increase by 150 basis points.
- Additional temporary spillovers in other regions:
  - Corporate spreads temporarily increase by 25 basis points in the European Union.
  - Corporate spreads temporarily increase by 15 basis points in the rest of the world.
- Note on calibration: the corporate-spread layer is based on estimates that the Brexit vote contributed about 100 basis points to corporate spreads in the United Kingdom (ECB 2017), recognizing that observed increases were partly offset by accommodative monetary policy and supportive global macro conditions.

### Macroeconomic policy assumptions and constraints
- Monetary policy:
  - United Kingdom: monetary policy is eased according to a Taylor-type reaction function.
  - Euro area: unable to ease conventional monetary policy further because of the lower bound on nominal interest rates; additional unconventional measures, if implemented, would make simulated short-to-medium-term EU GDP declines smaller than shown.
  - Other regions: monetary policy follows a Taylor-type reaction function, except Japan, which is also constrained by the lower bound (but the lower bound does not play a role in simulations given the small impact on Japan).
- Fiscal policy: scenarios assume some automatic fiscal stabilization, reflected in an increase in the overall government deficit in both the United Kingdom and the European Union in the short to medium term.
- Exchange rate and capital flows:
  - Simulations feature a small, temporary real depreciation of the pound, mainly due to accommodative monetary policy.
  - Effects on output from capital outflows are ambiguous: a more depreciated exchange rate supports external competitiveness but could negatively shock UK households’ wealth, especially if financial conditions tighten further.

### Short- to medium-term results (Scenario outcomes)
- United Kingdom:
  - Under Scenario A, the total negative effect on UK GDP (difference between scenario and baseline) is about 3.5 percent by 2021.
  - Dynamics: immediate negative impact on foreign and domestic demand, partly eased by a more gradual UK approach that limits short-term import-cost increases; accommodative monetary policy and adjustments in wages and prices lead to some recovery in the medium term as imports are replaced by domestic production.
- European Union:
  - Decline in activity of 0.5 percent in GDP by 2021 under Scenario A.
  - Aggregate EU effects mask important heterogeneity across countries.
- World:
  - The decline in the United Kingdom and the European Union account for most of the decrease in global GDP: 0.2 percent over the same period.
- The simulations do not reflect the full effects from Brexit because some effects are already embedded in the current baseline; the two scenarios capture some, but not all, uncertainty about timing, magnitude, and policy responses.

### Long-term effects and channels
- Two channels driving long-term losses relative to the current WEO baseline:
  - Higher tariffs and nontariff barriers reduce returns to capital in the United Kingdom and the European Union, lowering firms’ desired capital stock and reducing potential output—impact is much larger in the United Kingdom.
  - Stricter immigration policies reduce the size of the labor force in the United Kingdom and expand the size of the labor force in the European Union.
- Long-term quantified impacts (percent deviation from April 2019 WEO baseline):
  - United Kingdom potential output: lower by almost 3 percent in the long term relative to the current baseline.
  - European Union potential output: decline of about 0.3 percent in the long term.
  - World: global GDP down by 0.1 percent in the long term.
- The simulations do not include:
  - Additional effects on productivity from higher trade costs that could weigh on long-term output.
  - Possible effects stemming from capital outflows and additional pressures on the exchange rate.
  - Potential long-term declines in financial sector output due to the loss of passporting rights are acknowledged as uncertain.

### Baseline and other global assumptions embedded in forecasts
- Tariffs: baseline factors in US tariffs as of September 2018 and retaliatory measures, including a 25 percent tariff on $50 billion in imports from China and a 10 percent tariff on an additional $200 billion in imports from China (September 2018); tariffs on $200 billion of US imports from China are assumed to stay at 10 percent in the baseline; China’s response of 5–10 percent tariffs on $60 billion in US imports is incorporated.
- Fiscal policy: expansionary across advanced economies in 2019, expected to turn contractionary in 2020 as US stimulus unwinds; expansionary across emerging market and developing economies in 2019, turning contractionary in 2020.
- Monetary policy: US federal funds rate expected to increase to about 2.75 percent by the end of 2019; policy rates close to zero in Japan through 2020 and negative in the euro area until mid-2020.
- Financial conditions: baseline assumes a gradual tightening of global financial conditions with varying intensity across economies.
- Commodity price projections:
  - Oil prices: average projected at $59.2 in 2019 and $59.0 in 2020; about $60 a barrel by 2023.
  - Metal prices: 2.4 percent year over year in 2019 and decline by 2.2 percent in 2020.
  - Food prices: decline 2.9 percent year over year in 2019 and increase 2.1 percent in 2020.

### Comparison with other studies
- Other studies typically estimate long-term negative effects of Brexit (relative to staying in the European Union) on output ranging from 3 percent to 10 percent.
- The long-term results here are in the middle of that range once effects already in the current baseline (a long-term loss of 3 percent of GDP according to IMF (2018)) are included.

*Source: IMF staff estimates, World Economic Outlook April 2019 (Scenario Box 1 and related text).*

### Chapter 2 of the April 2018 World Economic Outlook.

### Chapter 2 — Special Feature: Commodity Market Developments and Forecasts

### Energy prices and overall commodity movements
- The IMF’s Primary Commodity Price Index declined by 6.9 percent between August 2018 and February 2019.
- Energy prices fell sharply by 17.0 percent between August 2018 and February 2019 and drove the overall decline amid high volatility.
- Food prices increased by 1.9 percent between August 2018 and February 2019.
- Base metal prices increased between August 2018 and February 2019 despite earlier downward pressure from trade tensions and weaker activity in China.
- Coal prices decreased as China’s economy grew at its slowest pace since 1990.
- Natural gas prices fluctuated widely, driven by changing weather conditions, especially in North America.

### Oil: trends, drivers, and prospects
- Oil prices surged to more than $80 a barrel in early October 2018, their highest level since November 2014, ahead of US sanctions against Iran.
- US crude oil production averaged 10.9 million barrels a day (mbd) in 2018, an increase of 1.6 mbd over the previous year and exceeding expectations by 0.3 mbd since the October WEO.
- Between early October and the end of November 2018, oil prices fell sharply due to record US production growth, temporary waivers for imports of Iranian oil, and prospects for weaker global economic growth.
- On December 7, 2018, OPEC and non-OPEC countries agreed to cut crude oil production by 0.8 mbd and 0.4 mbd, respectively, from their October 2018 level, starting in January 2019 for an initial six-month period.
- Oil producers’ cuts coupled with unplanned outages supported prices, which rebounded to above $60 in February 2019.
- As of February, oil futures contracts indicated that Brent prices will stay at about $60 for the next five years.
- Baseline assumptions (based on futures prices) suggest average annual prices of $59.2 a barrel in 2019—a decrease of 13.4 percent from the 2018 average—and $59.0 a barrel in 2020 for the IMF’s average petroleum spot prices.
- The International Energy Agency expects oil demand to grow by 1.3 mbd and 1.4 mbd in 2018 and 2019, respectively, a 0.1 mbd downward revision for both years (relative to the October WEO).
- Supply-side slows since the beginning of 2019 include mandatory production cuts by Canada, supply cuts by OPEC and non-OPEC countries, and involuntary outages in Venezuela.
- Upside short-term price risks: geopolitical events in the Middle East, civil unrest in Venezuela, a tougher US stance against Iran and Venezuela, and slower-than-expected US production growth.
- Downside risks: stronger-than-expected US production and noncompliance among OPEC and non-OPEC countries; trade tensions and other risks to global growth reducing oil demand.

### Metal prices: rebound and sector details
- Metal prices increased 7.6 percent between August 2018 and February 2019.
- Iron ore prices increased 28.8 percent between August 2018 and February 2019 amid supply disruptions including:
  - a derailment of a BHP iron ore train on November 5;
  - a fire at a Rio Tinto export terminal on January 10;
  - the collapse of Brumadinho dam at Vale SA’s mine on January 25.
- Copper prices increased 4.1 percent between August 2018 and February 2019 on US–China trade optimism and market deficits for both concentrate and refined copper.
- Aluminum fell 9.2 percent between August 2018 and February 2019 following the lifting of US sanctions on Rusal and improved prospects for removal of the production embargo on Hydro’s Alunorte in the second half of 2019.
- Nickel dropped 5.4 percent between August 2018 and February 2019 on stronger-than-expected production from Indonesia and the Philippines.
- Zinc increased 7.8 percent from August to February 2019 due to persistent supply tightness partly from environmental clampdowns in China.
- Cobalt declined by 49.3 percent between August 2018 and February 2019 because of rising supply from the Democratic Republic of the Congo.
- The IMF annual base metal price index is projected to increase by 2.4 percent in 2019 (relative to its average in 2018) and decrease by 2.2 percent per year in 2020.
- Metal price upside risks: higher-than-expected metals demand from China and supply shortages from stricter environmental regulations.
- Metal price downside risks: faster moderation in global economic growth and further slowdown of the Chinese economy.

### Food prices: dynamics and forecasts
- The IMF’s food and beverage price index increased by 1.9 percent between August 2018 and February 2019.
- Wheat prices decreased by 15.8 percent between August 2018 and February 2019, supported by a competitive Russian ruble and Russian exports.
- Corn and soybeans increased by 4.4 percent and 5.6 percent, respectively, between August 2018 and February 2019.
- Poultry prices increased by 3.9 percent between August 2018 and February 2019 due to strong consumer demand.
- World sugar prices jumped by 23.7 percent between August 2018 and February 2019, partly due to expectations of lower output in 2019 from Brazil and India.
- Cotton prices declined by 14.2 percent between August 2018 and February 2019 due to weaker-than-expected demand and ample stocks in China.
- Food prices are projected to decrease by 2.9 percent in 2019 and then increase by 2.1 percent in 2020.
- Upside risks to the food forecast include weather disruptions (noting weak El Niño conditions announced on February 14, 2019) and a resolution of the trade conflict between the United States and China.

### Commodity prices as indicators of economic activity
- Commodities represent about 17 percent of global trade and remain fundamental production inputs.
- Commodities are storables and trade in liquid and deep markets; their prices reflect current and expected future demand and supply, making them useful for nowcasting or forecasting global economic activity.
- Challenges to using commodity prices as indicators:
  - Commodity supply shocks and commodity-specific demand factors can confound signals.
  - Possible reverse causality (especially for oil) can introduce countercyclicality.
- Analytical approach:
  - The analysis is split into two parts: (1) identification of commodity price cycles and cyclical synchronization with economic activity; (2) exploitation of comovement among commodity prices to isolate global demand factors and test their nowcasting and predictive power.
  - Commodity cycle dating follows Harding and Pagan (2002), applied to an unbalanced panel (starting in 1957) of 57 (real) commodity price series across energy, metals, food and beverages, and raw agricultural materials.
  - The same dating procedure is applied to detrended global industrial production and GDP; a Hodrick-Prescott filter with a very low lambda is used to extract a stable trend from global industrial production and GDP, and quarterly GDP data have been interpolated monthly.
- Methodological notes:
  - Commodity price series are monthly averages from the IMF’s Primary Commodity Price System, denominated in US dollars and divided by US consumer price inflation.
  - The Bry and Boschan–type algorithm requires candidate turning points to alternate between peaks and troughs and each phase to be at least 12 months long.

*Source: Chapter 2, Special Feature: Commodity Market Developments and Forecasts, World Economic Outlook, April 2019.*

### 4. Brent

### 4. Brent

### Commodity cycle characteristics
- Most commodities show asymmetric phases characterized by longer and dull contractions punctuated by sharp expansions.
- Energy commodities:
  - Full energy cycle tends to last slightly less than four years.
  - Table 1.SF.1 averages for Energy:
    - Duration (Months): Expansion 20; Contraction 24
    - Amplitude (Log difference, percent): Expansion 64.72; Contraction 62.81
    - Sharpness (Log difference, percent): Expansion 3.37; Contraction 3.01
- Base Metals (Table 1.SF.1 averages):
  - Duration (Months): Expansion 18; Contraction 24
  - Amplitude (Log difference, percent): Expansion 55.19; Contraction 57.98
  - Sharpness (Log difference, percent): Expansion 3.05; Contraction 2.41
- Food and Beverages (Table 1.SF.1 averages):
  - Duration (Months): Expansion 16; Contraction 20
  - Amplitude (Log difference, percent): Expansion 45.25; Contraction 49.60
  - Sharpness (Log difference, percent): Expansion 2.80; Contraction 2.33
- Agricultural Raw Materials (Table 1.SF.1 averages):
  - Duration (Months): Expansion 18; Contraction 22
  - Amplitude (Log difference, percent): Expansion 43.27; Contraction 46.70
  - Sharpness (Log difference, percent): Expansion 2.46; Contraction 2.00
- Interpretation:
  - Supply shocks, especially when inventory stocks or spare production capacity is low, tend to cause spikes in prices.
  - Demand factors also play an important role in commodity price movements.

### Synchronization with economic activity
- Synchronization metric:
  - Concordance calculates the share of time two series are in the same phase; bounded between 0 and 1.
  - Two independent random walks have a concordance of 0.5.
  - A value of 1 (–1) means that all commodity prices are expanding (contracting) simultaneously; value of 0 implies half of commodity prices are in the same phase.
- Findings:
  - Agricultural prices, especially food prices, are on average only modestly in sync with economic activity.
  - Bellwethers of global industrial production are mostly base metals (zinc, copper, tin) and, to a lesser extent, energy and fertilizers.
  - Propane shows the highest synchronization with global industrial production.
  - Some raw agricultural materials, such as cotton, have relatively high synchronization with global industrial production.
  - Food and beverages are more synchronized to global GDP than to industrial production because income, rather than production, plays a more relevant role in their demand (example: arabica coffee).
- Commodity-wide concordance:
  - The commodity-wide concordance metric (share of commodities in expansion or contraction) anticipates turning points of economic activity—typically peaks/troughs when activity is expanding/contracting most.
  - Commodity-wide concordance is indicative of the relative importance of global demand factors versus supply or commodity-specific demand factors in a given period.

### Latent factor extraction and interpretation
- Methodology:
  - A factor model is estimated at monthly frequency using principal components to isolate movements in commodity prices driven by global economic activity.
  - Log differences of prices (divided by the US consumer price index) were z-scored for factor estimation.
- Factor structure:
  - The first two extracted factors explain about 20 percent of the variance in commodity price monthly changes.
  - First factor: global factor strongly related to global GDP movements.
  - Second factor: relative-price factor representing a negative demand shift for agricultural products relative to energy and metals (a relative-price signal).
  - When cumulated, the first and second factors show a positive correlation of 0.67.
  - The relative-price factor has a negative sign on the first factor of the agriculture subsample.
  - Regression of the global (relative-price) factor on first factors from agriculture and nonagriculture yields R-squared of 0.99 (0.88).
- Notes:
  - Precious metals (gold, silver) and non-freely traded commodities (iron ore before 2009, uranium) are less synchronized and may behave more like financial assets or be excluded for factor identification.
  - The (negative of the) first factor in levels mimics movements in the US dollar real effective exchange rate (REER), though this association weakens at higher frequencies.

### Nowcasting and forecasting global activity using commodity factors
- Nowcasting setup:
  - Global industrial production (monthly) and global GDP (quarterly) are regressed on their own lagged value and latent factors, with specifications:
    - Specification 1: first principal component (global factor)
    - Specification 2: first two principal components (global and relative-price factors)
    - Specification 3: first principal components of agricultural and nonagricultural commodities (split sample)
  - Benchmark: autoregressive process AR(p) with optimal lag determined by Bayesian information criterion.
- Nowcast results (Table 1.SF.2 and Table 1.SF.3):
  - Global Industrial Production Nowcast (sample January 1980 to December 2018):
    - Benchmark RMSE 0.55%
    - Specification 1 RMSE 0.54%; Ratio 0.99
    - Specification 2 RMSE 0.53%; Ratio 0.97
    - Specification 3 RMSE 0.54%; Ratio 0.98
  - Global GDP Nowcast (sample 1980:Q1 to 2018:Q3):
    - One Month Information:
      - Benchmark RMSE 0.42%
      - Specification 1 RMSE 0.38%; Ratio 0.90
      - Specification 2 RMSE 0.37%; Ratio 0.90
      - Specification 3 RMSE 0.38%; Ratio 0.90
    - Two Months Information:
      - Benchmark RMSE 0.42%
      - Specification 1 RMSE 0.36%; Ratio 0.87
      - Specification 2 RMSE 0.36%; Ratio 0.86
      - Specification 3 RMSE 0.36%; Ratio 0.86
    - Quarter Information:
      - Benchmark RMSE 0.42%
      - Specification 1 RMSE 0.36%; Ratio 0.86
      - Specification 2 RMSE 0.35%; Ratio 0.84
      - Specification 3 RMSE 0.35%; Ratio 0.85
  - Interpretation:
    - Introducing latent factors increases nowcast ability relative to the AR(p) benchmark.
    - For GDP, improvement in RMSE relative to benchmark is 10 percent with only the global factor from one month of commodity price information; improvement increases to 15 percent when the quarter is completed.
    - R-squared for GDP nowcast is about 0.48 in the shown specification.
    - Commodity prices are mostly informative during periods of high economic volatility, when the AR(p) process performs poorly.
- Out-of-sample forecast evaluation (recursive estimation, sample used for forecasting 2000–18):
  - Forecasting Global Industrial Production and GDP (Table 1.SF.4):
    - IP (Month ahead):
      - Benchmark RMSE 0.55%
      - Specification 1 RMSE 0.50%; Ratio 0.92
      - Specification 2 RMSE 0.49%; Ratio 0.90
      - Specification 3 RMSE 0.50%; Ratio 0.92
    - GDP (One Month Information):
      - Benchmark RMSE 0.51%
      - Specification 1 RMSE 0.50%; Ratio 0.99
      - Specification 2 RMSE 0.51%; Ratio 1.00
      - Specification 3 RMSE 0.51%; Ratio 1.00
    - GDP (Two Months Information):
      - Benchmark RMSE 0.51%
      - Specification 1 RMSE 0.48%; Ratio 0.95
      - Specification 2 RMSE 0.48%; Ratio 0.95
      - Specification 3 RMSE 0.48%; Ratio 0.95
    - GDP (Quarter Information):
      - Benchmark RMSE 0.51%
      - Specification 1 RMSE 0.46%; Ratio 0.91
      - Specification 2 RMSE 0.46%; Ratio 0.91
      - Specification 3 RMSE 0.46%; Ratio 0.90
  - Interpretation:
    - All specifications improve one-month-ahead global industrial production forecasts relative to the benchmark; specification 2 (two factors) does best with a 10 percent improvement reported elsewhere.
    - One-quarter-ahead GDP forecasts are improved as commodity price information for the quarter becomes available; when the full quarter is available, RMSE of the next-quarter GDP is improved by almost 10 percent relative to the benchmark.
- Overall conclusion:
  - There is substantial information embedded in commodity prices for nowcasting and forecasting global economic activity once idiosyncratic factors are eliminated.
  - Major movements in prices of base metals, and to some extent energy and agricultural products, provide significant signals about the state of the global economy, particularly during periods of significant fluctuations.

*International Monetary Fund | April 2019*

### Annex Table 1.1.1. European Economies: Real GDP, Consumer Prices, Current Account Balance, and Unemployment

### Annex Table 1.1.1. European Economies: Real GDP, Consumer Prices, Current Account Balance, and Unemployment

### Overview
- Coverage: Europe aggregates, Advanced Europe, Euro Area, and a range of individual European economies.
- Indicators and units:
  - Real GDP: Annual percent change (2018, 2019, 2020 projections).
  - Consumer Prices: Annual averages, percent (2018, 2019, 2020 projections).
  - Current Account Balance: Percent of GDP (2018, 2019, 2020 projections).
  - Unemployment: Percent (2018, 2019, 2020 projections).

### Aggregate and euro-area figures
- Europe
  - Real GDP: 2.2, 1.2, 1.8
  - Consumer Prices: 3.2, 2.9, 2.8
  - Current Account Balance: 2.2, 2.2, 2.1
  - Unemployment: . . . (not shown)
- Advanced Europe
  - Real GDP: 1.8, 1.3, 1.6
  - Consumer Prices: 1.9, 1.4, 1.6
  - Current Account Balance: 2.7, 2.6, 2.5
  - Unemployment: 7.1, 7.0, 6.9
- Euro Area
  - Real GDP: 1.8, 1.3, 1.5
  - Consumer Prices: 1.8, 1.3, 1.6
  - Current Account Balance: 3.0, 2.9, 2.8
  - Unemployment: 8.2, 8.0, 7.7

### Selected advanced European economies (key statistics)
- Germany
  - Real GDP: 1.5, 0.8, 1.4
  - Consumer Prices: 1.9, 1.3, 1.7
  - Current Account Balance: 7.4, 7.1, 6.8
  - Unemployment: 3.4, 3.4, 3.3
- France
  - Real GDP: 1.5, 1.3, 1.4
  - Consumer Prices: 2.1, 1.3, 1.5
  - Current Account Balance: –0.7, –0.4, 0.0
  - Unemployment: 9.1, 8.8, 8.4
- Italy
  - Real GDP: 0.9, 0.1, 0.9
  - Consumer Prices: 1.2, 0.8, 1.2
  - Current Account Balance: 2.6, 2.9, 2.6
  - Unemployment: 10.6, 10.7, 10.5
- Spain
  - Real GDP: 2.5, 2.1, 1.9
  - Consumer Prices: 1.7, 1.2, 1.6
  - Current Account Balance: 0.8, 0.8, 0.8
  - Unemployment: 15.3, 14.2, 14.1
- Netherlands
  - Real GDP: 2.5, 1.8, 1.7
  - Consumer Prices: 1.6, 2.3, 1.6
  - Current Account Balance: 9.8, 9.3, 8.9
  - Unemployment: 3.8, 3.7, 3.6
- United Kingdom
  - Real GDP: 1.4, 1.2, 1.4
  - Consumer Prices: 2.5, 1.8, 2.0
  - Current Account Balance: –3.9, –4.2, –4.0
  - Unemployment: 4.1, 4.2, 4.4
- Switzerland
  - Real GDP: 2.5, 1.1, 1.5
  - Consumer Prices: 0.9, 0.8, 0.9
  - Current Account Balance: 8.8, 9.0, 9.0
  - Unemployment: 2.6, 2.8, 2.8
- Sweden
  - Real GDP: 2.3, 1.2, 1.8
  - Consumer Prices: 2.0, 1.9, 1.7
  - Current Account Balance: 2.0, 2.4, 2.5
  - Unemployment: 6.3, 6.3, 6.3
- Norway
  - Real GDP: 1.4, 2.0, 1.9
  - Consumer Prices: 2.8, 1.9, 1.7
  - Current Account Balance: 8.1, 7.4, 7.2
  - Unemployment: 3.9, 3.7, 3.7
- Ireland
  - Real GDP: 6.8, 4.1, 3.4
  - Consumer Prices: 0.7, 1.2, 1.5
  - Current Account Balance: 10.0, 9.1, 8.3
  - Unemployment: 5.7, 5.3, 5.0

### Emerging and Developing Europe (selected economies)
- Emerging and Developing Europe (aggregate)
  - Real GDP: 3.6, 0.8, 2.8
  - Consumer Prices: 8.7, 9.0, 7.5
  - Current Account Balance: –2.2, –0.9, –1.4
  - Unemployment: . . . (not shown)
- Turkey
  - Real GDP: 2.6, –2.5, 2.5
  - Consumer Prices: 16.3, 17.5, 14.1
  - Current Account Balance: –3.6, 0.7, –0.4
  - Unemployment: 11.0, 12.7, 11.4
- Poland
  - Real GDP: 5.1, 3.8, 3.1
  - Consumer Prices: 1.6, 2.0, 1.9
  - Current Account Balance: –0.7, –1.1, –1.5
  - Unemployment: 3.8, 3.6, 3.5
- Romania
  - Real GDP: 4.1, 3.1, 3.0
  - Consumer Prices: 4.6, 3.3, 3.0
  - Current Account Balance: –4.6, –5.2, –4.8
  - Unemployment: 4.2, 4.8, 4.9
- Hungary
  - Real GDP: 4.9, 3.6, 2.7
  - Consumer Prices: 2.8, 3.2, 3.1
  - Current Account Balance: 0.5, 0.5, 0.6
  - Unemployment: 3.7, 3.5, 3.4
- Serbia
  - Real GDP: 4.4, 3.5, 4.0
  - Consumer Prices: 2.0, 2.0, 2.5
  - Current Account Balance: –5.2, –5.5, –5.0
  - Unemployment: 13.7, 13.4, 13.2
- Bulgaria
  - Real GDP: 3.2, 3.3, 3.0
  - Consumer Prices: 2.6, 2.4, 2.3
  - Current Account Balance: 3.9, 1.9, 1.3
  - Unemployment: 5.2, 5.0, 5.0
- Croatia
  - Real GDP: 2.7, 2.6, 2.5
  - Consumer Prices: 1.5, 1.5, 1.6
  - Current Account Balance: 2.9, 2.1, 1.6
  - Unemployment: 10.0, 9.0, 8.0

### Key cross-sectional observations (from table data)
- Growth: Several large advanced economies show deceleration from 2018 to 2019 (for example, Germany 1.5 → 0.8; Italy 0.9 → 0.1) with modest rebound projected in 2020 for many.
- Inflation (consumer prices): Broadly moderate across advanced Europe with country variation (e.g., Turkey 16.3, 17.5, 14.1 versus Switzerland 0.9, 0.8, 0.9).
- Current accounts: Large surpluses in some economies (e.g., Netherlands 9.8, 9.3, 8.9; Germany 7.4, 7.1, 6.8) and persistent deficits in others (e.g., United Kingdom –3.9, –4.2, –4.0; France –0.7, –0.4, 0.0).
- Unemployment: Substantial differences across countries (e.g., Spain 15.3, 14.2, 14.1; Germany 3.4, 3.4, 3.3).

*Source: Annex Table 1.1.1. European Economies: Real GDP, Consumer Prices, Current Account Balance, and Unemployment (table contents).*

### 2018. Strategies for Left-Behind Places. Washington, DC:

### ch1 - 2018. Strategies for Left-Behind Places. Washington, DC:

### References and cited works (as listed in the source)
- 2018. Strategies for Left-Behind Places. Washington, DC: Brookings Institution.
- HM Treasury. 2016. “HM Treasury analysis: the long-term economic impact of EU membership and the alternatives”
- International Monetary Fund (IMF). 2018. “United Kingdom: Selected Issues.” IMF Country Report 18/317, Washington, DC.
- International Monetary Fund (IMF). 2019. “Fiscal Policies for Implementing Paris Climate Strategies.” Washington, DC.
- Jacks, David S. 2013. “From Boom to Bust: A Typology of Real Commodity Prices in the Long Run.” Cliometrica 1–20.
- Kandilov, Ivan T. 2009. “Do Exporters Pay Higher Wages? Plant-Level Evidence from an Export Refund Policy in Chile.” World Bank Economic Review 23 (2): 269–94.
- Kilian, Lutz. 2009. Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market.” American Economic Review 99 (3): 1053–69.
- Kilian, Lutz, and Daniel P. Murphy. 2014. “The Role of Inventories and Speculative Trading in the Global Market for Crude Oil.” Journal of Applied Econometrics 29 (3): 454–78.
- Kilian, Lutz, and Xiaoqing Zhou. 2018. “Modeling Fluctuations in the Global Demand for Commodities.” Journal of International Money and Finance 88: 54–78.
- Leichenko, Robin, and Julie Silva. 2004. “International Trade, Employment, and Earnings: Evidence from US Rural Counties.” Regional Studies 38 (4): 355–74.
- Moretti, Enrico. 2011. “Local Labor Markets.” In Handbook of Labor Economics, edited by O. Ashenfelter and D. E. Card, 1237–313. Amsterdam: Elsevier.
- Nakov, Anton, and Andrea Pescatori. 2010. “Oil and the Great Moderation.” Economic Journal 120 (543): 131–56.
- Nunn, Ryan, Jana Parsons, and Jay Shambaugh. 2018. “The Geography of Prosperity.” The Hamilton Project, Brookings Institution, Washington, DC.
- Partridge, Mark D., Dan S. Rickman, M. Rose Olfert, and Ying Tan. 2017. “International Trade and Local Labor Markets: Do Foreign and Domestic Shocks Affect Regions Differently?” Journal of Economic Geography 17 (2): 375–409.
- Pindyck, Robert, and Julio Rotemberg. 1990. “The Excess Comovement of Commodity Prices.” Economic Journal 100 (December): 1173–189.
- Stock, James H., and Mark W. Watson. 2002. “Forecasting Using Principal Components from a Large Number of Predictors.” Journal of the American Statistical Association 97 (460): 1167–179.
- Stuermer, Martin. 2018. “150 Years of Boom and Bust: What Drives Mineral Commodity Prices?” Macroeconomic Dynamics 22 (3): 702–17.
- West, Kenneth D., and Ka-Fu Wong. 2014. “A Factor Model for Co-Movements of Commodity Prices.” Journal of International Money and Finance 42: 289–309.

### Thematic clustering implied by cited works
- Commodity prices and oil market dynamics
  - Jacks, David S. 2013. “From Boom to Bust: A Typology of Real Commodity Prices in the Long Run.” Cliometrica 1–20.
  - Kilian, Lutz. 2009. Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market.” American Economic Review 99 (3): 1053–69.
  - Kilian, Lutz, and Daniel P. Murphy. 2014. “The Role of Inventories and Speculative Trading in the Global Market for Crude Oil.” Journal of Applied Econometrics 29 (3): 454–78.
  - Kilian, Lutz, and Xiaoqing Zhou. 2018. “Modeling Fluctuations in the Global Demand for Commodities.” Journal of International Money and Finance 88: 54–78.
  - Nakov, Anton, and Andrea Pescatori. 2010. “Oil and the Great Moderation.” Economic Journal 120 (543): 131–56.
  - Pindyck, Robert, and Julio Rotemberg. 1990. “The Excess Comovement of Commodity Prices.” Economic Journal 100 (December): 1173–189.
  - Stuermer, Martin. 2018. “150 Years of Boom and Bust: What Drives Mineral Commodity Prices?” Macroeconomic Dynamics 22 (3): 702–17.
  - West, Kenneth D., and Ka-Fu Wong. 2014. “A Factor Model for Co-Movements of Commodity Prices.” Journal of International Money and Finance 42: 289–309.

- International trade, local labor markets, and regional prosperity
  - Leichenko, Robin, and Julie Silva. 2004. “International Trade, Employment, and Earnings: Evidence from US Rural Counties.” Regional Studies 38 (4): 355–74.
  - Moretti, Enrico. 2011. “Local Labor Markets.” In Handbook of Labor Economics, edited by O. Ashenfelter and D. E. Card, 1237–313. Amsterdam: Elsevier.
  - Nunn, Ryan, Jana Parsons, and Jay Shambaugh. 2018. “The Geography of Prosperity.” The Hamilton Project, Brookings Institution, Washington, DC.
  - Partridge, Mark D., Dan S. Rickman, M. Rose Olfert, and Ying Tan. 2017. “International Trade and Local Labor Markets: Do Foreign and Domestic Shocks Affect Regions Differently?” Journal of Economic Geography 17 (2): 375–409.
  - Kandilov, Ivan T. 2009. “Do Exporters Pay Higher Wages? Plant-Level Evidence from an Export Refund Policy in Chile.” World Bank Economic Review 23 (2): 269–94.

- Forecasting, econometric methods, and policy analysis
  - Stock, James H., and Mark W. Watson. 2002. “Forecasting Using Principal Components from a Large Number of Predictors.” Journal of the American Statistical Association 97 (460): 1167–179.
  - HM Treasury. 2016. “HM Treasury analysis: the long-term economic impact of EU membership and the alternatives”
  - International Monetary Fund (IMF). 2018. “United Kingdom: Selected Issues.” IMF Country Report 18/317, Washington, DC.
  - International Monetary Fund (IMF). 2019. “Fiscal Policies for Implementing Paris Climate Strategies.” Washington, DC.

*Source: ch1 - 2018. Strategies for Left-Behind Places. Washington, DC:*

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_Source: https://www.imf.org/-/media/files/publications/weo/2019/april/english/ch1.pdf_