## The World Economy: Synchronized Slowdown, Precarious Outlook _IMF Blog, October 15, 2019_ ## Source details **Canonical URL:** [The World Economy: Synchronized Slowdown, Precarious Outlook](https://www.imf.org/en/blogs/articles/2019/10/15/the-world-economy-synchronized-slowdown-precarious-outlook) ## Other formats - [Markdown version](/en/blogs/articles/2019/10/15/the-world-economy-synchronized-slowdown-precarious-outlook/index.md) - [Structured JSON version](/en/blogs/articles/2019/10/15/the-world-economy-synchronized-slowdown-precarious-outlook/index.json) - [Bundle manifest](/en/blogs/articles/2019/10/15/the-world-economy-synchronized-slowdown-precarious-outlook/bundle-manifest.json) ## Bibliographic details - Authors: Gita Gopinath - Published: October 15, 2019 --- ### Global outlook and growth projections - We are downgrading growth for 2019 to 3 percent, its slowest pace since the global financial crisis. - In the October World Economic Outlook, we project global growth to improve to 3.4 percent in 2020, a downward revision of 0.2 percent from April projections. - We estimate that the US-China trade tensions will cumulatively reduce the level of global GDP by 0.8 percent by 2020. - In the absence of monetary stimulus, global growth would be lower by 0.5 percentage points in both 2019 and 2020. ### Regional and group projections - Advanced economies: - Growth downgraded to 1.7 percent for 2019 (compared to 2.3 percent in 2018). - Projected to stay at 1.7 percent in 2020. - Emerging market and developing economies: - Growth revised down to 3.9 percent for 2019 (compared to 4.5 percent in 2018). - Projected rebound to 4.6 percent in 2020. - About half of the 2020 rebound is driven by recoveries or shallower recessions in stressed emerging markets such as Argentina, Iran, and Turkey. - The remainder of the rebound is driven by recoveries in countries where growth slowed significantly in 2019 relative to 2018, such as Brazil, India, Mexico, Russia, and Saudi Arabia. ### Drivers of the synchronized slowdown - Rising trade barriers and increasing geopolitical tensions are weakening growth. - Country-specific factors are weighing on several emerging market economies. - Structural forces: low productivity growth and aging demographics in advanced economies. - Sharp deterioration in manufacturing activity and global trade, with higher tariffs and prolonged trade policy uncertainty damaging investment and demand for capital goods. - Trade volume growth in the first half of 2019 has fallen to 1 percent, the weakest level since 2012. - The automobile industry is contracting owing to factors including disruptions from new emission standards in the euro area and China that have had durable effects. ### Sectoral dynamics - Manufacturing and trade: extremely weak across many economies, driving the slowdown. - Services sector: continues to hold up almost across the globe, keeping labor markets buoyant and supporting wage growth and consumption spending in advanced economies. - Early signs of softening in the services sector in the United States and euro area. ### Monetary policy and financial stability - Major central banks have appropriately eased policy in the absence of inflationary pressures and in the face of weakening activity to reduce downside risks and prevent de-anchoring of inflation expectations. - Monetary policy support has materially bolstered growth; without it global growth would be 0.5 percentage points lower in both 2019 and 2020. - Recommendation: deploy effective macroprudential regulation today to prevent mispricing of risk and excessive buildup of financial vulnerabilities. ### Downside risks and fragility - Escalating trade and geopolitical tensions, including Brexit-related risks, could further disrupt economic activity and derail fragile recoveries, particularly in emerging market economies and the euro area. - Potential consequences of intensified risks: abrupt shifts in risk sentiment, financial disruptions, and reversal in capital flows to emerging market economies. - In advanced economies, low inflation could become entrenched and constrain monetary policy space further into the future. ### Policy recommendations to reignite and sustain growth - Undo trade barriers with durable agreements, rein in geopolitical tensions, and reduce domestic policy uncertainty to boost confidence, investment, manufacturing, and trade. - Support steps to de-escalate tensions and roll back recent trade measures, particularly if they can provide a path towards a comprehensive and lasting deal. - Economic policy should support activity in a more balanced manner: - Monetary policy should be coupled with fiscal support where fiscal space is available and policy is not already too expansionary. - Countries like Germany and the Netherlands should take advantage of low borrowing rates to invest in social and infrastructure capital. - If growth deteriorates more severely, an internationally coordinated fiscal response, tailored to country circumstances, may be required. - Undertake structural reforms to boost productivity, improve resilience, and lower inequality. - Reforms in emerging market and developing economies are more effective when good governance is already in place. - Preserve and improve the global trading system; multilateralism is essential to tackle major issues such as risks from climate change, cybersecurity risks, tax avoidance and tax evasion, and the opportunities and challenges of emerging financial technologies. *IMF blog post by Gita Gopinath, October 15, 2019* --- ## References - [عربي,](https://www.imf.org/ar/News/Articles/2019/10/15/blog-weo-the-world-economy-synchronized-slowdown-precarious-outlook) - [中文,](http://www.imf.org/zh/News/Articles/2019/10/15/blog-weo-the-world-economy-synchronized-slowdown-precarious-outlook) - [日本語](http://www.imf.org/ja/News/Articles/2019/10/15/blog-weo-the-world-economy-synchronized-slowdown-precarious-outlook) - [Português](https://www.imf.org/pt/News/Articles/2019/10/15/blog-weo-the-world-economy-synchronized-slowdown-precarious-outlook) - [World Economic Outlook](https://www.imf.org/en/Publications/WEO/Issues/2019/10/01/world-economic-outlook-october-2019) - [April projections](https://blogs.imf.org/2019/04/09/the-global-economy-a-delicate-moment/) - [https://www.imf.org/wp-content/uploads/2019/10/eng-oct-8-weo-ch1.png](https://www.imf.org/wp-content/uploads/2019/10/eng-oct-8-weo-ch1.png) _Source: https://www.imf.org/en/blogs/articles/2019/10/15/the-world-economy-synchronized-slowdown-precarious-outlook_