Global Economic Prospects : Slow Growth, Policy Challenges

Abstract

Global growth is expected to recover to 2.5 percent in 2020, up slightly from the post-crisis low of 2.4 percent registered last year amid weakening trade and investment, and edge up further over the forecast horizon. This projected recovery could be stronger if recent policy actions, particularly those that have mitigated trade tensions, lead to a sustained reduction in policy uncertainty. Nevertheless, downside risks predominate, including the possibility of a re-escalation of global trade tensions, sharp downturns in major economies, and financial disruptions in emerging market and developing economies (EMDEs). The materialization of theserisks would test the ability of policymakers to respond effectively to negative events. Associated policy challenges are compounded by high debt levels and subdued productivity growth. Many EMDEs need to rebuild macroeconomic policy space to enhance resilience to possible adverse developments. They also need to pursue decisive reforms to bolster governance and business climates, improve tax policy, promote trade integration, and rekindle productivity growth, while protecting vulnerable groups. These policy actions will help foster inclusive and sustainable long-term growth and poverty alleviation.