## Finding Solid Footing for the Global Economy

_IMF Blog, February 19, 2020_

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**Canonical URL:** [Finding Solid Footing for the Global Economy](https://www.imf.org/en/blogs/articles/2020/02/19/blog-finding-solid-footing-for-the-global-economy)

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## Bibliographic details
- Authors: Kristalina Georgieva
- Published: February 19, 2020

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### Global outlook and recent policy actions
- IMF projected growth to strengthen from 2.9 percent in 2019 to 3.3 percent in 2020 and 3.4 percent in 2021.
- Monetary easing added approximately 0.5 percentage points to global growth in 2019.
- Forty-nine central banks cut rates 71 times as part of the most synchronized monetary action since the global financial crisis.
- Growth remains modest in many regions and is expected to remain below historical averages over the medium term.
- Uncertainty is becoming the new normal; reducing avoidable policy uncertainty is a priority.

### Coronavirus (COVID-19) scenarios and implications
- The coronavirus is described as the most pressing uncertainty and a global health emergency not anticipated in January.
- Best-case scenario: disruptions end quickly, Chinese economy bounces back soon; a sharp drop in GDP growth in China in the first quarter of 2020 but only a small reduction for the entire year; spillovers to other countries remain relatively minor and short-lived through temporary supply chain disruptions, tourism, and travel restrictions.
- Severe/long-lasting outbreak scenario: sharper and more protracted growth slowdown in China; amplified global impact via substantial supply chain disruptions and a more persistent drop in investor confidence, especially if the epidemic spreads beyond China.

### Trade: assessment of the Phase 1 U.S.-China deal and broader needs
- The Phase 1 trade deal reduced the drag from trade tensions on the level of GDP in 2020 by 0.2 percent—about one quarter of the total impact.
- The deal addresses only a small share of recently imposed tariffs and specifies minimum increases in China’s imports from the United States.
- Managed trade provisions are estimated to cost the global economy close to $100 billion dollars.
- The agreement leaves many underlying issues between China and the United States unaddressed.
- Recommendation: pursue a modern global trading system that unleashes the full potential of services and e-commerce while protecting intellectual property rights.

### Climate: impacts and policy priorities
- Example damages: over 200 percent of Dominica’s GDP from Hurricane Maria; over 60 percent of Puerto Rico’s GDP from Hurricane Maria.
- IMF staff estimates show that a typical climate-related natural disaster reduces growth by an average of 0.4 percentage points in the affected country in the year of the event.
- Frequency of such events is increasing, particularly in the poorest countries least able to cope.
- Policy focus: mitigation and adaptation.
- A recent IMF staff study shows that global oil demand is expected to peak in the coming decades.
- Gulf Cooperation Council and all members of the G-20 are urged to focus on diversification.
- Investments in clean energy and resilient infrastructure can yield a "triple dividend": averting future losses, delivering innovation gains, and creating new opportunities for those most in need.
- Carbon tax revenues could be used to cut taxes elsewhere, fund assistance to affected households, or finance spending that closes societal gaps.
- For countries and communities at highest risk, investing in adaptation is urgent and cost-effective; analysis by the Global Commission on Adaptation suggests benefits could far outweigh costs.

### Inequality: gaps, risks, and policy responses
- Income and wealth inequalities remain persistently high across much of the OECD and the G-20.
- Significant opportunity gaps exist by gender, age, and geography and can widen into social unrest.
- Recommendation: renewed focus on raising living standards and creating better paying jobs.
- IMF, in collaboration with the World Bank, is identifying key areas to increase access to opportunities, notably investing in high-quality education, R&D, and digitalization.
- Low interest rates may give some policymakers additional fiscal space, but public debt is near record levels in many places.
- In countries with a high debt-to-GDP ratio, fiscal restraint remains warranted.
- Reducing deficits—when needed—should protect essential social spending to increase access to opportunities and build a stronger foundation.

### Conclusion and collective action
- Working together, policymakers can reduce uncertainty and put the global economy on more solid footing.
- The remarks invoke Ibn Khaldun’s concept of strength in solidarity and the power of joint purpose as guidance for G-20 ministers and governors.

*Kristalina Georgieva, February 19, 2020 — "Finding Solid Footing for the Global Economy"*

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## References

- [عربي](https://www.imf.org/ar/News/Articles/2020/02/20/blog-finding-solid-footing-for-the-global-economy)
- [, Español](https://blog-dialogoafondo.imf.org/?p=12862)
- [日本語](http://www.imf.org/ja/News/Articles/2020/02/20/blog-finding-solid-footing-for-the-global-economy)
- [Português,](http://www.imf.org/pt/News/Articles/2020/02/20/blog-finding-solid-footing-for-the-global-economy?sc_mode=1)
- [https://www.imf.org/wp-content/uploads/2020/02/MD-blog-1.jpg](https://www.imf.org/wp-content/uploads/2020/02/MD-blog-1.jpg)
- [IMF staff estimates](https://www.imf.org/external/np/g20/021920.htm)
- [https://www.imf.org/wp-content/uploads/2020/02/MD-blog-2.jpg](https://www.imf.org/wp-content/uploads/2020/02/MD-blog-2.jpg)
- [https://www.imf.org/wp-content/uploads/2020/02/MD-blog-3.jpg](https://www.imf.org/wp-content/uploads/2020/02/MD-blog-3.jpg)
- [A recent IMF staff study](https://www.imf.org/en/Publications/Departmental-Papers-Policy-Papers/Issues/2020/01/31/The-Future-of-Oil-and-Fiscal-Sustainability-in-the-GCC-Region-48934)

_Source: https://www.imf.org/en/blogs/articles/2020/02/19/blog-finding-solid-footing-for-the-global-economy_