World Economic Outlook- January 2020

As the first month of FY 2020 draws to a close, analysts are trying to gain an insight into the growth prospects of the world economy. IMF has revised its global growth rate downwards for the year 2020 to 3.3%, joining other key international forecasting organizations in their downward revisions.

Key takeaways:

• The downward revision reflects the assessment of growth prospects based on economic activities in some emerging market economies, especially India.
• The downward revision is also a result of trade uncertainties, policy implementation delays, geopolitical tensions between the US and Iran, and climate-related disasters, including the hurricanes in the Caribbean regions and the bushfires in Australia.
• Projected recovery in global growth is dependent on recoveries in stressed and underperforming emerging market economies.

Presenting some key excerpts from the World Economic Outlook Report from the IMF

Modest pick up expected in 2020

On the upside, it seems that the slowdown in the manufacturing and global trade sectors are bottoming out. Hence, there will be upward growth from these levels and the policy makers will move towards an accommodative policy and resort to interest rate cuts and fiscal easing in some countries, including China, Korea and the US.

Other positive factors are intermittent favorable news of the US-China trade negotiations and diminished fears of no-deal Brexit.

Supportive financial conditions owing to rate cuts augmented the global market sentiment in 2019. Equities continued to advance in the large advanced economies over the fall; core sovereign bond yields rose from their September low, and portfolio flows to emerging economies strengthened, particularly in the bond markets.

The effects of substantial monetary easing across many economies in 2019 are expected to keep the global economy going in 2020. The global estimate would have been 0.5% lower in 2019 and 2020 without the same.

The global recovery is projected to be accompanied by an improvement in trade growth, reflecting a recovery in domestic demand and investment in particular, as well as easing of struggles in the auto and tech sectors.

The growth is expected to stabilize at 1.6 % in 2020-21 across advanced economies, which accounts to a 0.1 % downward revision, mostly due to the downward revision for US , UK, Euro Area , Japan and Hong Kong.

Growth is expected to increase from 4.4% in 2020 to 4.6 % in 2021 (0.2% lower than the earlier projection) in the emerging markets and developed economies group.