Global growth is sluggish but tentatively stabilizing after two years of slowing, the IMF reported Monday (January 20) in its latest quarterly update to the World Economic Outlook report.
“So we have seen tentative signs that global growth may be stabilizing at subdued levels. We are projecting growth to recover modestly from 2.9 percent in 2019 to 3.3 percent in 2020 and then 3.4 percent in 2021,” says IMF Head of Research Gita Gopinath.
The signing of the so-called ‘Phase One’ trade deal between the US and China and the fading uncertainty surrounding Brexit are positive steps. But other risks are arising.
“So the balance of risks are still so to the downside. Now there is some positive news from the U.S. China trade negotiations and from Brexit. However, geopolitical risks are rising. Social unrest is prevalent in many countries and we could see a re-escalation of trade tensions,” she added.
A large downward revision of Indian growth weighed on the overall global figure. But generally the IMF sees the world economy returning to or just below potential.
The IMF is recommending that countries with high debt to shore up their fiscal balance sheets during this expansion, to better be prepared for a future downturn. But Gopinath also urged countries with fiscal space to use those resources to boost demand.
“So to support the recovering growth, it’s important for policymakers to do no harm. Monetary policy should remain accommodative and countries that have fiscal space should use it to improve social and human capital and climate friendly infrastructure.”
A full copy of the report can be found at IMF.org/WEO