## How to Help, Not Hinder Global Growth

_IMF Blog, June 5, 2019_

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## Bibliographic details
- Authors: Christine Lagarde
- Published: June 5, 2019

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### Trade tensions (author and date)
- Author: Christine Lagarde
- Date: June 5, 2019
- Context: G-20 finance ministers and central bank governors meeting in Fukuoka; Fukuoka described as Japan’s “startup city” and example of embracing trade, innovation, and openness.

### Signs of stabilization
- IMF cut its global growth forecast to 3.3 percent in 2019, largely because of temporary, country-specific factors and the tangible effects of trade tensions.
- IMF projected a pickup in growth in the second half of 2019 and a further acceleration to 3.6 percent in 2020, the same growth rate as in 2018.
- Policy responses supporting stabilization:
  - More patient pace of monetary normalization by the US Fed and the European Central Bank.
  - Increased fiscal stimulus in China.
- Recent data: while first-quarter activity disappointed in parts of emerging Asia and Latin America, growth was stronger than expected in the United States, the euro area, and Japan.

### Significant stumbling blocks
- Uncertainty over whether first-quarter momentum in advanced economies will hold and whether improvements in stressed economies will materialize or take longer.
- Potential adverse impacts from a no-deal Brexit and recent increases in oil prices.
- Underlying vulnerabilities:
  - Elevated corporate debt levels that could trigger disruptive capital outflows from emerging markets if financial conditions shift suddenly.
  - Disappointing medium-term growth prospects due to population aging, slow productivity, and excessive economic inequality.

### Trade tensions are looming larger
- Estimated impacts of tariffs:
  - Recently announced and envisaged US-China tariffs could subtract about 0.3 percent from global GDP in 2020, with more than half of the impact stemming from business confidence effects and negative financial market sentiment.
  - Overall, US-China tariffs—including those implemented last year—could reduce global GDP by 0.5 percent in 2020.
  - This 0.5 percent reduction amounts to a loss of about US$455 billion.
- Distributional effects:
  - Protectionist measures are hurting growth and jobs, making tradable consumer goods less affordable, and disproportionately harming low-income households.
- Policy prescription on trade:
  - Remove recently implemented trade barriers and avoid further barriers in whatever form.

### The G-20 can help (trade and institutional reform)
- Immediate priority: resolve current trade tensions and modernize the international trade system.
- Areas for strengthening WTO rules: subsidies, intellectual property, and trade in services.
- Potential gains from liberalizing services:
  - IMF research shows that liberalizing trade in services could add about US$350 billion to global GDP in the long run.
- Additional cooperative priorities:
  - Reform international corporate taxation.
  - Strengthen the global financial safety net.
  - Tackle climate change.

### Strengthening resilience and inclusiveness
- Fiscal constraints:
  - High public debt and low interest rates have left many countries with limited policy room, requiring carefully calibrated fiscal policies balancing growth, debt sustainability, and social objectives.
- Addressing adjustment costs:
  - Policies needed to manage dislocations from trade and technological innovation and to support those left behind.
- Structural reform agenda:
  - Lower barriers to entry in retail and professional services.
  - Encourage greater participation of women in the workforce.
  - Estimated payoff: jointly implemented structural measures could boost G-20 GDP by 4 percent in the long term.
- Structural reforms also increase resilience and inclusiveness of growth.

### Coordinate if growth falters
- Contingency planning: prepare for the next downturn by being ready to use all policy tools to maximize combined effect.
- Policy mix in a downturn:
  - Support demand through decisive monetary easing and fiscal stimulus wherever possible.
  - Use supportive policies to boost the impact of structural reforms where demand is weak.
- Simulation findings from IMF G-20 note:
  - Under a scenario where all policy tools are used, G-20 output recovers significantly faster and more sustainably.
  - Policy coordination across countries produces reinforcing positive spillovers; if all countries act decisively, the collective benefit is larger.

### Conclusion
- International cooperation is critical now, not only in a downturn, because the global economy faces a delicate moment.
- For G-20 nations, the imperative is to “help, not hinder” the expected pickup in growth by removing stumbling blocks and harnessing openness.
- The “Fukuoka spirit” of openness can help set the global economy on a more durable and inclusive path.

*Source: How to Help, Not Hinder Global Growth — Christine Lagarde, June 5, 2019.*

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## References

- [عربي](https://www.imf.org/ar/News/Articles/2019/06/06/blog-how-to-help-not-hinder-global-growth)
- [, 中文](https://www.imf.org/zh/News/Articles/2019/06/06/blog-how-to-help-not-hinder-global-growth)
- [Português,](https://www.imf.org/pt/News/Articles/2019/06/06/blog-how-to-help-not-hinder-global-growth)
- [日本語](https://www.imf.org/ja/News/Articles/2019/06/06/blog-how-to-help-not-hinder-global-growth)
- [global growth forecast](https://www.imf.org/en/Publications/WEO/Issues/2019/03/28/world-economic-outlook-april-2019)
- [inequality](https://blogs.imf.org/2019/05/15/tackling-income-inequality-requires-new-policies/)
- [https://www.imf.org/wp-content/uploads/2019/06/eng-june-3-md1.png](https://www.imf.org/wp-content/uploads/2019/06/eng-june-3-md1.png)
- [IMF research](https://www.imf.org/external/np/g20/111918.htm)
- [corporate taxation](https://blogs.imf.org/2019/03/25/corporate-taxation-in-the-global-economy/)
- [4 percent](https://blogs.imf.org/2018/11/19/chart-of-the-week-grading-the-g-20-on-its-growth-goals/)
- [G-20 note](https://www.imf.org/external/np/g20/060519.htm)
- [https://www.imf.org/wp-content/uploads/2019/06/chart2.png](https://www.imf.org/wp-content/uploads/2019/06/chart2.png)

_Source: https://www.imf.org/en/blogs/articles/2019/06/05/blog-how-to-help-not-hinder-global-growth_