## A Low-Growth World Is an Unequal, Unstable World _IMF Blog, July 23, 2024_ ## Source details **Canonical URL:** [A Low-Growth World Is an Unequal, Unstable World](https://www.imf.org/en/blogs/articles/2024/07/23/a-low-growth-world-is-an-unequal-unstable-world) ## Other formats - [Markdown version](/en/blogs/articles/2024/07/23/a-low-growth-world-is-an-unequal-unstable-world/index.md) - [Structured JSON version](/en/blogs/articles/2024/07/23/a-low-growth-world-is-an-unequal-unstable-world/index.json) - [Bundle manifest](/en/blogs/articles/2024/07/23/a-low-growth-world-is-an-unequal-unstable-world/bundle-manifest.json) ## Bibliographic details - Authors: Kristalina Georgieva - Published: July 23, 2024 --- ### Overview - Author: Kristalina Georgieva - Date: July 23, 2024 - Core message: Prolonged low global growth risks entrenching poverty and widening within-country inequality, but a balanced set of policies can prevent a low-growth, rising-inequality trap. ### Growth outlook and macro risks - IMF World Economic Outlook update projections: - Global growth expected to reach 3.2 percent this year. - Global growth expected to reach 3.3 percent in 2025. - These figures are well below the 3.8 percent average from the turn of the century until the pandemic. - Medium-term growth projections remain at their lowest in decades. - Despite resilience to successive shocks (including higher interest rates), the danger is a prolonged period of anemic growth that would entrench poverty and inequality. ### Evidence on stagnation and inequality - New IMF analysis: periods of stagnation lasting four years or more tend to push up income inequality within countries by almost 20 percent—considerably higher than the increase due to outright recession. - Mechanisms during stagnation: - Sluggish job creation and wage growth increase structural unemployment. - Reduced share of a country’s income flowing to workers. - Limited fiscal space amplifies widening gaps between top and bottom income groups. - Pandemic impacts cited: - Extreme poverty increased after decades of decline. - Global hunger surged. - The long-term decline in inequality across countries stalled. ### Gearing Up Inclusive Growth (policy priority 1) - Diagnosis: Most of the decline in growth in recent decades has been driven by a slump in productivity; labor and capital aren’t flowing to the most dynamic firms. - Recommended measures: - Promote competition and improve access to finance to allocate resources more efficiently and boost productivity. - Increase labor force participation (for example, of women) to offset the drag on growth from aging populations. - Preserve open trade as an engine of growth and jobs; over the last 40 years: - Real income per capita has doubled globally. - More than a billion emerged from extreme poverty. - Trade as a share of gross domestic product increased by half. - Ensure the gains from trade are shared fairly rather than closing off economies. ### Making Fiscal Policies People-Focused (policy priority 2) - Fiscal context: - Many economies face severe fiscal pressures. - In developing countries, debt-servicing costs are taking up a bigger share of tax revenue while spending demands grow. - Fiscal strategy: - Implement a gradual and people-focused fiscal effort to alleviate fiscal risks while limiting negative impacts on growth and inequality. - Measures include raising revenue, improving governance, and protecting social programs. - Revenue potential and equity: - There is much scope for developing countries to raise more revenue through tax reforms—as much as 9 percent of GDP, according to IMF research. - Emphasize progressive taxation so those who can afford to pay more do so (examples: taxing capital income and property). - Governance and trust: - Taxpayer confidence requires that taxes fund public services rather than enrich the powerful; improve transparency and reduce corruption. - Social spending: - Protect social-spending programs (school meals, unemployment insurance, pensions). - Well-targeted cash-transfer programs—such as Brazil’s Bolsa Familia—can support the vulnerable. - IMF research shows that strong redistributive policies in a growing G20 economy—such as social-spending programs and public investment in education—can reduce inequality between 1.5 and 5 times more than weaker policies. ### Strengthening the Global Backstop (policy priority 3) - IMF actions to bolster the global financial safety net: - Reviewing concessional lending instrument for low-income countries, the Poverty Reduction and Growth Trust (PRGT), to ensure it is adequately resourced and its long-term finances are sustainable given demand expected to exceed pre-pandemic levels. - Reviewing the surcharge policy for the first time in nearly a decade to ensure continued provision of financing at affordable rates. - Members agreed last year to increase permanent quota resources, allowing the IMF to maintain lending capacity; the IMF is counting on G20 members to ratify the increase. - Rationale: A strong global safety net is needed to serve the IMF’s most vulnerable members and prevent countries from falling into crises that exacerbate inequality and instability. ### Concluding policy imperative - One lesson of recent history: do not ignore those left behind by economic and technological progress—individuals within countries or entire nations. - With the right mix of policies and international cooperation, it is possible to escape a low-growth, rising-inequality trap and build a more prosperous and equitable world for all. *Source: IMF blog post "A Low-Growth World Is an Unequal, Unstable World" by Kristalina Georgieva, July 23, 2024.* --- ## Content in this bundle - **Domestic Resource Mobilization** - [Domestic Resource Mobilization (Markdown version)](/-/media/files/research/imf-and-g20/2024/domestic-resource-mobilization.pdf.md){rel="alternate" type="text/markdown"} - [Domestic Resource Mobilization (PDF)](/-/media/files/research/imf-and-g20/2024/domestic-resource-mobilization.pdf){rel="external" type="application/pdf"} - **G-20 Note on Alternative Options for Revenue Mobilization, June 2024** - [G-20 Note on Alternative Options for Revenue Mobilization, June 2024 (Markdown version)](/external/np/g20/pdf/2024/062424.pdf.md){rel="alternate" type="text/markdown"} - [G-20 Note on Alternative Options for Revenue Mobilization, June 2024 (PDF)](/external/np/g20/pdf/2024/062424.pdf){rel="external" type="application/pdf"} - **072224** - [072224 (Markdown version)](/external/np/g20/pdf/2024/072224.pdf.md){rel="alternate" type="text/markdown"} - [072224 (PDF)](/external/np/g20/pdf/2024/072224.pdf){rel="external" type="application/pdf"} --- ## References - [update](https://www.imf.org/en/Publications/WEO/Issues/2024/07/16/world-economic-outlook-update-july-2024?cid=ca-com-homepage) - [driven](https://www.imf.org/en/Blogs/Articles/2024/04/10/world-must-prioritize-productivity-reforms-to-revive-medium-term-growth) - [social](https://www.imf.org/en/Publications/Policy-Papers/Issues/2024/04/30/Operational-Guidance-Note-for-IMF-Engagement-on-Social-Spending-Issues-548431) - [Bolsa](https://www.imf.org/en/Publications/WP/Issues/2020/06/19/Social-Programs-and-Formal-Employment-Evidence-from-the-Brazilian-Bolsa-Famlia-Program-49512) _Source: https://www.imf.org/en/blogs/articles/2024/07/23/a-low-growth-world-is-an-unequal-unstable-world_