## WEO Update, January 2020

## Source details

**Canonical URL:** [WEO Update, January 2020](https://www.imf.org/-/media/files/publications/weo/2020/update/january/english/text.pdf)

## Other formats

- [Markdown version](/-/media/files/publications/weo/2020/update/january/english/text.pdf.md)
- [Structured JSON version](/-/media/files/publications/weo/2020/update/january/english/text.pdf.json)

---

### Recent developments and near-term dynamics
- Trade policy uncertainty, geopolitical tensions, and idiosyncratic stress in key emerging market economies weighed on global activity—especially manufacturing and trade—in the second half of 2019.
- Intensifying social unrest and weather-related disasters (hurricanes in the Caribbean, drought and bushfires in Australia, floods in eastern Africa, drought in southern Africa) posed additional headwinds.
- Some indications emerged toward year-end that global growth may be bottoming out.
- Monetary policy easing continued into the second half of 2019 in several economies; the 2019 global growth estimate and 2020 projection would have been 0.5 percentage point lower in each year without monetary stimulus.
- Temporary drags on global manufacturing—auto sector emissions-standard adjustments, a lull in new tech product launches, and inventory accumulation—appeared to fade by late 2019.
- Service sector activity weakened somewhat but remained expansionary, supported by still-resilient consumer spending, tight labor markets, low unemployment, and modestly rising wages.

### Financial conditions and market sentiment
- Central bank rate cuts and the Fed’s shift to “on hold” forward guidance after three rate cuts in the second half of 2019 reinforced financial market sentiment.
- Intermittent favorable news on US-China economic relations and diminished fears of a hard Brexit supported investors’ risk appetite.
- Currency movements between September and early January:
  - US dollar and Japanese yen weakened by about 2 percent.
  - Chinese renminbi gained about 1½ percent.
  - British pound appreciated 4 percent since September.
- Equities advanced in large advanced economies over the fall; core sovereign bond yields rose from September lows; portfolio flows to emerging market economies strengthened, particularly to bond funds.
- Financial conditions remain broadly accommodative across advanced and emerging market economies.

### Global growth outlook (headline projections)
- Global growth estimated at 2.9 percent in 2019.
- Projected to increase to 3.3 percent in 2020 and to 3.4 percent in 2021.
- Compared to the October WEO forecast:
  - 2019: 0.1 percentage point reduction.
  - 2020: 0.1 percentage point reduction.
  - 2021: 0.2 percentage point reduction.
- The downward revision primarily reflects negative surprises in a few emerging market economies, notably India, and in a few cases the impact of increased social unrest.

### Regional and country projections (selected)
- Advanced economies: projected to stabilize at 1.6 percent in 2020–21 (0.1 percentage point lower for 2020 than in the October WEO).
  - United States: 2.3 percent in 2019; 2 percent in 2020; 1.7 percent in 2021 (0.1 percentage point lower for 2020 vs October WEO).
  - Euro area: 1.2 percent in 2019; 1.3 percent in 2020 (0.1 percentage point downward revision); 1.4 percent in 2021.
  - United Kingdom: stabilize at 1.4 percent in 2020 and firm to 1.5 percent in 2021—unchanged from October WEO (assumes orderly EU exit end of January and gradual transition).
  - Japan: 1 percent in 2019; 0.7 percent in 2020 (0.1 and 0.2 percentage point higher than October WEO for 2019 and 2020 respectively); 0.5 percent in 2021.
- Emerging market and developing economies (aggregate): 3.7 percent in 2019; 4.4 percent in 2020; 4.6 percent in 2021 (0.2 percentage point lower for both 2020 and 2021 than in the October WEO).
- Emerging and developing Asia:
  - 5.6 percent in 2019; 5.8 percent in 2020; 5.9 percent in 2021 (0.2 and 0.3 percentage point lower for 2019 and 2020 compared to October WEO).
  - India: 4.8 percent in 2019; 5.8 percent in 2020; 6.5 percent in 2021 (1.2 and 0.9 percentage point lower than in the October WEO).
  - China: 6.1 percent in 2019; 6.0 percent in 2020; 5.8 percent in 2021. China’s 2020 forecast receives a 0.2 percentage point upgrade relative to the October WEO reflecting envisaged partial rollback of past tariffs and pause in additional tariff hikes as part of a “Phase One” trade deal.
  - ASEAN-5: slowed to 4.7 percent in 2019; projected to remain stable in 2020 and pick up in 2021; slight downgrades for Indonesia and Thailand.
- Emerging and developing Europe: 1.8 percent in 2019; around 2.5 percent in 2020–21 (0.1 percentage point higher for 2020 than October WEO).
- Latin America: 0.1 percent in 2019; 1.6 percent in 2020; 2.3 percent in 2021 (0.2 and 0.1 percentage point weaker respectively than October WEO).
  - Mexico: downgraded for 2020–21.
  - Chile: sizable markdown due to social unrest.
  - Brazil: upward revision to 2020 owing to improved sentiment after pension reform and fading mining-sector supply disruptions.
- Middle East and Central Asia: 2.8 percent in 2020 (0.1 percentage point lower than October WEO); 3.2 percent in 2021. Downgrade for Saudi Arabia on expected weaker oil output growth after OPEC+ decision to extend supply cuts. Risks from Iran, social unrest (Iraq, Lebanon), and civil strife (Libya, Syria, Yemen).
- Sub-Saharan Africa: growth expected to strengthen to 3.5 percent in 2020–21 (from ...).

### Risks, scenarios, and policy recommendations
- Risks to the baseline are less tilted to the downside compared to the October 2019 WEO but remain prominent.
- Downside risks include:
  - Rising geopolitical tensions, notably between the United States and Iran.
  - Intensifying social unrest.
  - Further worsening of relations between the United States and trading partners, and deepening economic frictions between other countries.
  - Materialization of these risks could rapidly deteriorate sentiment and cause global growth to fall below the baseline.
- Upside/supporting factors could include:
  - Fading idiosyncratic drags in key emerging markets.
  - Effects of monetary easing reinforcing links between resilient consumer spending and improved business spending.
- Policy recommendations:
  - Stronger multilateral cooperation and a more balanced national policy mix, considering available monetary and fiscal space, are essential to strengthen activity and forestall downside risks.
  - Build financial resilience, strengthen growth potential, and enhance inclusiveness.
  - Closer cross-border cooperation needed to address grievances with the rules-based trading system, curb greenhouse gas emissions, and strengthen the international tax architecture.
  - National policies should provide timely demand support as needed, using fiscal and monetary levers depending on available policy room.

### Overview of the World Economic Outlook Projections (additional context)
- The projection is 0.1 percentage point lower than in the October WEO for 2020 and 0.2 percentage point weaker for 2021.
- Downward revisions reflect:
  - South Africa: structural constraints and deteriorating public finances holding back business confidence and private investment.
  - Ethiopia: public sector consolidation, needed to contain debt vulnerabilities, expected to weigh on growth.
- Early signs of stabilization could persist, producing favorable dynamics between still-resilient consumer spending and improved business spending.
- A confluence of fading idiosyncratic drags in key emerging markets, monetary easing, improved sentiment following the “Phase One” US-China trade deal (partial rollback of previously implemented tariffs and a truce on new tariffs) could lead to a stronger recovery than currently projected.

### Policy priorities (detailed)
- Multilateral cooperation priorities:
  - Expeditiously address grievances with the rules-based trading system and promptly resolve the impasse over the World Trade Organization’s Appellate Body without raising tariffs and non-tariff barriers.
  - Cooperate to curtail cross-border cyberattacks and solve outstanding issues concerning intellectual property rights and technology transfer.
  - Cooperate on curbing greenhouse gas emissions and limiting the rise of global temperature with an approach that ensures appropriate burden-sharing across and within borders.
  - Reduce cross-border tax evasion and corruption; avoid rollback of global financial regulatory reforms; ensure an adequately resourced global financial safety net.
- Advanced economies:
  - Countries with fiscal space should increase spending on initiatives that raise productivity growth, including research, training, and physical infrastructure.
  - High debt countries should generally consolidate to prepare for the next downturn, except where private demand is very weak.
  - With policy rates close to the effective lower bound and long-term interest rates low or negative, fiscal stimulus can play a larger role where fiscal space exists and is not already excessively expansionary.
  - Prepare contingent fiscal responses in advance, prioritizing investment in mitigating climate change and areas that strengthen potential growth and ensure gains are widely shared (education, health, workforce skills, infrastructure).
  - Where debt sustainability constraints bind, slow the pace of fiscal consolidation if activity weakens substantially and market conditions permit.
  - Strengthen macroprudential policies, supervision, and bank balance sheet clean-up where needed.
- Emerging market and developing economies:
  - Economies in macroeconomic distress need policy adjustments to rebuild confidence and return to stable and sustainable growth, while ensuring adequate safety nets for the vulnerable.
  - High-debt economies should aim for consolidation, calibrated to avoid sharp activity slowdowns, by improving subsidy targeting, broadening the revenue base, and ensuring stronger compliance.
  - Economies with more secure conditions but weakened activity can use the recent decline in inflation to deploy further monetary support where real interest rates remain high.
  - Ensure financial resilience through adequate capital and liquidity buffers and minimize currency and maturity mismatches.
  - Make growth more inclusive through spending on health and education to raise human capital and incentivize entry of firms that create high value-added jobs.

### Global financial conditions: recent actions and developments (Box 1)
- Global financial conditions continue to be accommodative by historical standards and are little changed since the October 2019 Global Financial Stability Report, though easing has occurred in some individual economies.
- Monetary policy actions over the past three months include:
  - US Federal Reserve cut its policy rate by 25 basis points.
  - European Central Bank restarted net asset purchases at a pace of €20 billion per month.
  - People’s Bank of China reduced its medium-term lending facility rate by 5 basis points.
  - Turkey central bank cut its policy rate by 450 basis points.
  - Central banks in Russia and Brazil reduced their interest rates by 75 and 100 basis points, respectively.
- Market developments:
  - World equity markets have risen by about 8 percent over the past three months.
  - Long-term yields in the euro area, Japan and United States have increased by 15–30 basis points from very low levels.
  - US financial conditions unchanged on net: increased corporate valuations were broadly offset by the rise in long-term yields.
  - Financial conditions in the euro area continued to ease due to higher equity prices and tighter corporate bond spreads.
  - In China, financial conditions remained broadly unchanged though corporate valuations rose.
  - In the group of other emerging market economies (Brazil, India, Mexico, Poland, Russia, Turkey), aggregate conditions continued to ease further, driven by declines in interest rates and external borrowing costs; average sovereign spreads for this group have fallen by almost 25 basis points, and corporate bond spreads have tightened by a similar amount.

*WEO Update, January 2020 — IMF*

### 0.2 for 2021 compared to those in the October World Economic Outlook (WEO). The downward

### WEO Update, January 2020

### Recent developments and near-term dynamics
- Trade policy uncertainty, geopolitical tensions, and idiosyncratic stress in key emerging market economies weighed on global activity—especially manufacturing and trade—in the second half of 2019.
- Intensifying social unrest and weather-related disasters (hurricanes in the Caribbean, drought and bushfires in Australia, floods in eastern Africa, drought in southern Africa) posed additional headwinds.
- Some indications emerged toward year-end that global growth may be bottoming out.
- Monetary policy easing continued into the second half of 2019 in several economies; the 2019 global growth estimate and 2020 projection would have been 0.5 percentage point lower in each year without monetary stimulus.
- Temporary drags on global manufacturing—auto sector emissions-standard adjustments, a lull in new tech product launches, and inventory accumulation—appeared to fade by late 2019.
- Service sector activity weakened somewhat but remained expansionary, supported by still-resilient consumer spending, tight labor markets, low unemployment, and modestly rising wages.

### Financial conditions and market sentiment
- Central bank rate cuts and the Fed’s shift to “on hold” forward guidance after three rate cuts in the second half of 2019 reinforced financial market sentiment.
- Intermittent favorable news on US-China economic relations and diminished fears of a hard Brexit supported investors’ risk appetite.
- Currency movements between September and early January: US dollar and Japanese yen weakened by about 2 percent; Chinese renminbi gained about 1½ percent; British pound appreciated 4 percent since September.
- Equities advanced in large advanced economies over the fall; core sovereign bond yields rose from September lows; portfolio flows to emerging market economies strengthened, particularly to bond funds.
- Financial conditions remain broadly accommodative across advanced and emerging market economies.

### Global growth outlook (headline projections)
- Global growth estimated at 2.9 percent in 2019.
- Projected to increase to 3.3 percent in 2020 and to 3.4 percent in 2021.
- Compared to the October WEO forecast:
  - 2019: 0.1 percentage point reduction.
  - 2020: 0.1 percentage point reduction.
  - 2021: 0.2 percentage point reduction.
- The downward revision primarily reflects negative surprises in a few emerging market economies, notably India, and in a few cases the impact of increased social unrest.

### Regional and country projections (selected)
- Advanced economies: projected to stabilize at 1.6 percent in 2020–21 (0.1 percentage point lower for 2020 than in the October WEO).
  - United States: 2.3 percent in 2019; 2 percent in 2020; 1.7 percent in 2021 (0.1 percentage point lower for 2020 vs October WEO).
  - Euro area: 1.2 percent in 2019; 1.3 percent in 2020 (0.1 percentage point downward revision); 1.4 percent in 2021.
  - United Kingdom: stabilize at 1.4 percent in 2020 and firm to 1.5 percent in 2021—unchanged from October WEO (assumes orderly EU exit end of January and gradual transition).
  - Japan: 1 percent in 2019; 0.7 percent in 2020 (0.1 and 0.2 percentage point higher than October WEO for 2019 and 2020 respectively); 0.5 percent in 2021.
- Emerging market and developing economies (aggregate):
  - 3.7 percent in 2019; 4.4 percent in 2020; 4.6 percent in 2021 (0.2 percentage point lower for both 2020 and 2021 than in the October WEO).
- Emerging and developing Asia:
  - 5.6 percent in 2019; 5.8 percent in 2020; 5.9 percent in 2021 (0.2 and 0.3 percentage point lower for 2019 and 2020 compared to October WEO).
  - India: 4.8 percent in 2019; 5.8 percent in 2020; 6.5 percent in 2021 (1.2 and 0.9 percentage point lower than in the October WEO).
  - China: 6.1 percent in 2019; 6.0 percent in 2020; 5.8 percent in 2021. China’s 2020 forecast receives a 0.2 percentage point upgrade relative to the October WEO reflecting envisaged partial rollback of past tariffs and pause in additional tariff hikes as part of a “Phase One” trade deal.
  - ASEAN-5: slowed to 4.7 percent in 2019; projected to remain stable in 2020 and pick up in 2021; slight downgrades for Indonesia and Thailand.
- Emerging and developing Europe: 1.8 percent in 2019; around 2.5 percent in 2020–21 (0.1 percentage point higher for 2020 than October WEO).
- Latin America: 0.1 percent in 2019; 1.6 percent in 2020; 2.3 percent in 2021 (0.2 and 0.1 percentage point weaker respectively than October WEO).
  - Mexico: downgraded for 2020–21.
  - Chile: sizable markdown due to social unrest.
  - Brazil: upward revision to 2020 owing to improved sentiment after pension reform and fading mining-sector supply disruptions.
- Middle East and Central Asia: 2.8 percent in 2020 (0.1 percentage point lower than October WEO); 3.2 percent in 2021. Downgrade for Saudi Arabia on expected weaker oil output growth after OPEC+ decision to extend supply cuts. Risks from Iran, social unrest (Iraq, Lebanon), and civil strife (Libya, Syria, Yemen).
- Sub-Saharan Africa: growth expected to strengthen to 3.5 percent in 2020–21 (from ...). [text ends at this point in supplied content]

### Risks, scenarios, and policy recommendations
- Risks to the baseline are less tilted to the downside compared to the October 2019 WEO but remain prominent.
- Downside risks include:
  - Rising geopolitical tensions, notably between the United States and Iran.
  - Intensifying social unrest.
  - Further worsening of relations between the United States and trading partners, and deepening economic frictions between other countries.
  - Materialization of these risks could rapidly deteriorate sentiment and cause global growth to fall below the baseline.
- Upside/supporting factors could include:
  - Fading idiosyncratic drags in key emerging markets.
  - Effects of monetary easing reinforcing links between resilient consumer spending and improved business spending.
- Policy recommendations:
  - Stronger multilateral cooperation and a more balanced national policy mix, considering available monetary and fiscal space, are essential to strengthen activity and forestall downside risks.
  - Build financial resilience, strengthen growth potential, and enhance inclusiveness.
  - Closer cross-border cooperation needed to address grievances with the rules-based trading system, curb greenhouse gas emissions, and strengthen the international tax architecture.
  - National policies should provide timely demand support as needed, using fiscal and monetary levers depending on available policy room.

*WEO Update, January 2020*

### 3.3 percent in 2019). The projection is 0.1

### Overview of the World Economic Outlook Projections (WEO Update, January 2020)

### Baseline Outlook and Recent Revisions
- The projection is 0.1 percentage point lower than in the October WEO for 2020 and 0.2 percentage point weaker for 2021.
- Downward revisions reflect:
  - South Africa: structural constraints and deteriorating public finances holding back business confidence and private investment.
  - Ethiopia: public sector consolidation, needed to contain debt vulnerabilities, expected to weigh on growth.
- Early signs of stabilization could persist, producing favorable dynamics between still-resilient consumer spending and improved business spending.
- A confluence of fading idiosyncratic drags in key emerging markets, monetary easing, improved sentiment following the “Phase One” US-China trade deal (partial rollback of previously implemented tariffs and a truce on new tariffs) could lead to a stronger recovery than currently projected.

### Risks to the Outlook
- The balance of risks to the global outlook remains on the downside, but less skewed toward adverse outcomes than in the October WEO.
- Prominent downside risks:
  - Rising geopolitical tensions, notably between the United States and Iran, could disrupt global oil supply, hurt sentiment, and weaken already tentative business investment.
  - Intensifying social unrest across many countries could disrupt activity, complicate reform efforts, and weaken sentiment.
  - Higher tariff barriers between the United States and its trading partners, notably China, and expanded rationale for protectionist acts (including national security or currency grounds) could undermine the nascent bottoming out of global manufacturing and trade.
  - A materialization of any of these risks could trigger rapid shifts in financial sentiment, portfolio reallocations toward safe assets, and rising rollover risks for vulnerable corporate and sovereign borrowers, leading to a widespread tightening of financial conditions.
  - Weather-related disasters (tropical storms, floods, heatwaves, droughts, wildfires) driven by climate change have imposed severe humanitarian costs and livelihood loss and could contribute to cross-border migration and financial stress (for instance, in the insurance sector).

### Policy Priorities
- Overarching objective: stronger multilateral cooperation and national-level policies that provide timely support to foster a sustained recovery and enhance inclusiveness and social cohesion.
- Multilateral cooperation priorities:
  - Expeditiously address grievances with the rules-based trading system and promptly resolve the impasse over the World Trade Organization’s Appellate Body without raising tariffs and non-tariff barriers.
  - Cooperate to curtail cross-border cyberattacks and solve outstanding issues concerning intellectual property rights and technology transfer.
  - Cooperate on curbing greenhouse gas emissions and limiting the rise of global temperature with an approach that ensures appropriate burden-sharing across and within borders.
  - Reduce cross-border tax evasion and corruption; avoid rollback of global financial regulatory reforms; ensure an adequately resourced global financial safety net.
- Advanced economies:
  - Countries with fiscal space should increase spending on initiatives that raise productivity growth, including research, training, and physical infrastructure.
  - High debt countries should generally consolidate to prepare for the next downturn, except where private demand is very weak.
  - With policy rates close to the effective lower bound and long-term interest rates low or negative, fiscal stimulus can play a larger role where fiscal space exists and is not already excessively expansionary.
  - Prepare contingent fiscal responses in advance, prioritizing investment in mitigating climate change and areas that strengthen potential growth and ensure gains are widely shared (education, health, workforce skills, infrastructure).
  - Where debt sustainability constraints bind, slow the pace of fiscal consolidation if activity weakens substantially and market conditions permit.
  - Strengthen macroprudential policies, supervision, and bank balance sheet clean-up where needed.
- Emerging market and developing economies:
  - Economies in macroeconomic distress need policy adjustments to rebuild confidence and return to stable and sustainable growth, while ensuring adequate safety nets for the vulnerable.
  - High-debt economies should aim for consolidation, calibrated to avoid sharp activity slowdowns, by improving subsidy targeting, broadening the revenue base, and ensuring stronger compliance.
  - Economies with more secure conditions but weakened activity can use the recent decline in inflation to deploy further monetary support where real interest rates remain high.
  - Ensure financial resilience through adequate capital and liquidity buffers and minimize currency and maturity mismatches.
  - Make growth more inclusive through spending on health and education to raise human capital and incentivize entry of firms that create high value-added jobs.

### Global Financial Conditions: Still Accommodative (Box 1)
- Global financial conditions continue to be accommodative by historical standards and are little changed since the October 2019 Global Financial Stability Report, though easing has occurred in some individual economies.
- Monetary policy actions over the past three months include:
  - US Federal Reserve cut its policy rate by 25 basis points.
  - European Central Bank restarted net asset purchases at a pace of €20 billion per month.
  - People’s Bank of China reduced its medium-term lending facility rate by 5 basis points.
  - Turkey central bank cut its policy rate by 450 basis points.
  - Central banks in Russia and Brazil reduced their interest rates by 75 and 100 basis points, respectively.
- Market developments:
  - World equity markets have risen by about 8 percent over the past three months.
  - Long-term yields in the euro area, Japan and United States have increased by 15–30 basis points from very low levels.
  - US financial conditions unchanged on net: increased corporate valuations were broadly offset by the rise in long-term yields.
  - Financial conditions in the euro area continued to ease due to higher equity prices and tighter corporate bond spreads.
  - In China, financial conditions remained broadly unchanged though corporate valuations rose.
  - In the group of other emerging market economies (Brazil, India, Mexico, Poland, Russia, Turkey), aggregate conditions continued to ease further, driven by declines in interest rates and external borrowing costs; average sovereign spreads for this group have fallen by almost 25 basis points, and corporate bond spreads have tightened by a similar amount.

*WEO Update, January 2020 — IMF*

---


_Source: https://www.imf.org/-/media/files/publications/weo/2020/update/january/english/text.pdf_