## The World Economy: Moving Sideways

_IMF Blog, October 4, 2016_

## Source details

**Canonical URL:** [The World Economy: Moving Sideways](https://www.imf.org/en/blogs/articles/2016/10/04/the-world-economy-moving-sideways)

## Other formats

- [Markdown version](/en/blogs/articles/2016/10/04/the-world-economy-moving-sideways/index.md)
- [Structured JSON version](/en/blogs/articles/2016/10/04/the-world-economy-moving-sideways/index.json)
- [Bundle manifest](/en/blogs/articles/2016/10/04/the-world-economy-moving-sideways/bundle-manifest.json)

## Bibliographic details
- Authors: Maurice Obstfeld
- Published: October 4, 2016

---

### Global outlook and recent performance
- Global output growth projected at 3.1 percent in 2016 and 3.4 percent in 2017.
- The new World Economic Outlook sees:
  - A slowdown for the group of advanced economies in 2016.
  - An offsetting pickup for emerging and developing economies in 2016.
  - Prospects for 2017 unchanged for both country groupings.
- Taken as a whole, the world economy has "moved sideways" with no noticeable deceleration over the last quarter.
- Within-country-group heterogeneity:
  - U.S. growth has disappointed in 2016.
  - Europe and Japan show smaller upside surprises.
  - Emerging Asia has performed better.
  - Sub-Saharan Africa has been dragged down by big commodity exporters, while a number of smaller countries have benefited from lower commodity prices.

### Longer-term trends and constraints on growth
- Compared to the 1998–2007 averages, long-term potential growth is now projected to be lower in all regions.
- Current growth rates are lower still in much of the world, notably in emerging market and developing economies.
- Contributing factors to lower potential and realized growth:
  - Demographic trends.
  - Unsustainable earlier-period developments: initial productivity burst from the information and communications technology revolution, China’s growth surge, and a global financial up-cycle that culminated in a severe worldwide crisis.
  - Persisting crisis legacies: high debt overhangs, non-performing loans on banks’ books, deflationary pressures, low investment, and eroded human capital.
- Feedback effects:
  - Negative output gaps remain widespread.
  - Investor and consumer caution over income growth prospects can depress realized growth further.
- Policy imbalance:
  - Policy response so far has relied excessively on central banks.
  - Markets fear that policy has no room to counter the next big negative economic shock.

### Political and social consequences
- Slow and incomplete recovery has been especially damaging where income distribution skewed toward highest earners.
- Political movements in some richer countries blame globalization and seek to wall off economies rather than engage cooperatively; Brexit is cited as an example.
- Political repercussions are likely to depress global growth further.

### Risks to the baseline projections
- Projections remain tilted to the downside.
- Upside recovery in 2017 and beyond could be derailed by several, possibly interacting developments:
  - A bumpy transition in China.
  - A sharp further fall in commodity prices.
  - A tightening in global financial conditions.
  - A sharp hike in trade barriers.
- Geopolitical tensions could flare up, adding to humanitarian crises in the Middle East and Africa and further complicating policymaking.

### Policy strategy: comprehensive, consistent, and coordinated
- The recommended strategy is three-pronged (as explained in a Staff Discussion Note):
  - Deploy structural and fiscal policy in support of monetary policy.
  - Use monetary policy to maximize the expansionary effects of structural reforms and active fiscal policy.
  - Ensure policies are consistent and well-communicated to stabilize expectations.
- Coordination among countries can confer beneficial spillovers (e.g., the 2014 Brisbane Action Plan on structural measures).
- If widely adopted, this approach can:
  - Raise growth now.
  - Defend against a negative global shock and limit damage to fiscal positions if implemented on a larger scale.

### Structural policy priorities
- A renewed commitment to lowering trade barriers is especially important, in contrast to current trends.
- Additional structural priorities:
  - Develop labor-market resilience.
  - Lower barriers to entry in product and service markets.
  - Ease adjustment for those most vulnerable to dislocations from technology, trade, and structural reforms.
- Coordinated action by policymakers can send the clearest message and have the biggest effect.

*Source: Maurice Obstfeld, "The World Economy: Moving Sideways", October 4, 2016.*

---

## Content in this bundle

- **全球经济：增长未见改善, 作者：莫里斯•奥伯斯法尔德, iMFdirect, 2016年10月4日**
  - [全球经济：增长未见改善, 作者：莫里斯•奥伯斯法尔德, iMFdirect, 2016年10月4日 (Markdown version)](/external/chinese/np/blog/2016/100416c.pdf.md){rel="alternate" type="text/markdown"}
  - [全球经济：增长未见改善, 作者：莫里斯•奥伯斯法尔德, iMFdirect, 2016年10月4日 (PDF)](/external/chinese/np/blog/2016/100416c.pdf){rel="external" type="application/pdf"}
- **世界経済：横ばい, モーリス・オブストフェルド, iMFdirect, 2016年10月4日**
  - [世界経済：横ばい, モーリス・オブストフェルド, iMFdirect, 2016年10月4日 (Markdown version)](/external/japanese/np/blog/2016/100416j.pdf.md){rel="alternate" type="text/markdown"}
  - [世界経済：横ばい, モーリス・オブストフェルド, iMFdirect, 2016年10月4日 (PDF)](/external/japanese/np/blog/2016/100416j.pdf){rel="external" type="application/pdf"}
- **Мировая экономика: следуя боковому тренду, Морис Обстфельд, 4 октября 2016 года**
  - [Мировая экономика: следуя боковому тренду, Морис Обстфельд, 4 октября 2016 года (Markdown version)](/external/russian/np/blog/2016/100416r.pdf.md){rel="alternate" type="text/markdown"}
  - [Мировая экономика: следуя боковому тренду, Морис Обстфельд, 4 октября 2016 года (PDF)](/external/russian/np/blog/2016/100416r.pdf){rel="external" type="application/pdf"}

---

## References

- [عربي](http://blog-montada.imf.org/?p=4496)
- [World Economic Outlook](http://www.imf.org/external/pubs/ft/weo/2016/02/index.htm)
- [Staff Discussion Note](https://blogs.imf.org/2016/09/28/the-whole-can-be-greater-than-the-sum-of-its-parts/)

_Source: https://www.imf.org/en/blogs/articles/2016/10/04/the-world-economy-moving-sideways_