Abstract
While growth in advanced economies is losing momentum amid trade tensions and policy uncertainty, activity in many emerging and low-income developing countries (EMDEs) has remained more robust, supported by still favorable financing conditions. Differences across EMDEs are large, however, and downside risks are building. Policy priorities include enhancing resilience in response to a more challenging global environment, creating fiscal space for essential development spending, containing debt vulnerabilities, and promoting strong and inclusive growth. Strengthening revenue generating capacity, enhancing public spending efficiency, and addressing infrastructure gaps are critical for reaching the 2030 Sustainable Development Goals.
While growth in advanced economies is losing momentum amid trade tensions and policy uncertainty, activity in many emerging and low-income developing countries (EMDEs) has remained more robust, supported by still favorable financing conditions. Differences across EMDEs are large, however, and downside risks are building. Policy priorities include enhancing resilience in response to a more challenging global environment, creating fiscal space for essential development spending, containing debt vulnerabilities, and promoting strong and inclusive growth. Strengthening revenue generating capacity, enhancing public spending efficiency, and addressing infrastructure gaps are critical for reaching the 2030 Sustainable Development Goals.
Economic Outlook and Risks
The global expansion is losing momentum, even though growth in most EMs and LIDCs is more resilient.
| The global expansion is weakening… | Global growth is projected to moderate to 3.3 percent in 2019—from 3.6 percent in 2018—against the backdrop of high policy uncertainty in many countries, trade tensions, weak growth in labor productivity, and country-specific shocks. The slowdown is most pronounced in advanced economies. After a modest recovery in 2020, growth is expected to level off to around 3½ percent over the medium term. Inflation pressures remain muted across most economies. |
| …. although growth in emerging market and developing economies is holding up better… | In emerging market and developing economies (EMDEs), growth is projected to decline marginally to 4.4 percent in 2019, from 4.5 percent in 2018. The moderation reflects in part slower growth in China, as regulatory tightening— needed to rein in domestic imbalances—takes effect and trade tensions with the United States impair sentiment. Activity is projected to remain weak in countries that have suffered from financial strains (Argentina and Turkey). But growth is holding up well in many other large emerging economies (India, Indonesia, Colombia, Peru), supported by robust domestic demand. In 2020, growth in EMDEs is expected to recover to 4.8 percent. |
| …despite sizable downside risks. | External risks in EMDEs relate to the slowdown in advanced economies, trade tensions, a possible tightening of global financial conditions, and, for commodity exporters, a subdued outlook for most commodity prices. Domestic vulnerabilities remain elevated—including in the financial and corporate sectors—even though they are lower than a few years ago. |
| In LIDCs, growth is resilient on average, but with a wide variation across countries. | In contrast to the slowdown in advanced economies, growth in low-income developing countries (LIDCs) is projected to pick up to 5.0 percent in 2019 from 4.6 percent in 2018. Some non-resource intensive countries are benefiting from lower oil prices (Ethiopia, Lao PDR, Myanmar), while frontier economies with market access are boosting investment by taking advantage of still attractive financing conditions (Côte d’Ivoire, Ghana, Kenya). This said, in 45 LIDCs—many of them fragile states struggling with security challenges—per capita growth is projected to underperform the global average (including Burundi, Libya, South Sudan, Yemen). |
| Elevated debt levels remain a concern. | About two-fifths of LIDCs are assessed to be either at high risk of debt distress or already in debt distress. Reflecting adverse terms-of-trade shocks and accommodative fiscal positions, public debt as a share of GDP in LIDCs surged from a median of 35 percent in 2013 to 50 percent in 2017, before moderating slightly to 47 percent in 2018. In some countries, debt contracted by public entities outside central government also played a role. |
| The global expansion is weakening… | Global growth is projected to moderate to 3.3 percent in 2019—from 3.6 percent in 2018—against the backdrop of high policy uncertainty in many countries, trade tensions, weak growth in labor productivity, and country-specific shocks. The slowdown is most pronounced in advanced economies. After a modest recovery in 2020, growth is expected to level off to around 3½ percent over the medium term. Inflation pressures remain muted across most economies. |
| …. although growth in emerging market and developing economies is holding up better… | In emerging market and developing economies (EMDEs), growth is projected to decline marginally to 4.4 percent in 2019, from 4.5 percent in 2018. The moderation reflects in part slower growth in China, as regulatory tightening— needed to rein in domestic imbalances—takes effect and trade tensions with the United States impair sentiment. Activity is projected to remain weak in countries that have suffered from financial strains (Argentina and Turkey). But growth is holding up well in many other large emerging economies (India, Indonesia, Colombia, Peru), supported by robust domestic demand. In 2020, growth in EMDEs is expected to recover to 4.8 percent. |
| …despite sizable downside risks. | External risks in EMDEs relate to the slowdown in advanced economies, trade tensions, a possible tightening of global financial conditions, and, for commodity exporters, a subdued outlook for most commodity prices. Domestic vulnerabilities remain elevated—including in the financial and corporate sectors—even though they are lower than a few years ago. |
| In LIDCs, growth is resilient on average, but with a wide variation across countries. | In contrast to the slowdown in advanced economies, growth in low-income developing countries (LIDCs) is projected to pick up to 5.0 percent in 2019 from 4.6 percent in 2018. Some non-resource intensive countries are benefiting from lower oil prices (Ethiopia, Lao PDR, Myanmar), while frontier economies with market access are boosting investment by taking advantage of still attractive financing conditions (Côte d’Ivoire, Ghana, Kenya). This said, in 45 LIDCs—many of them fragile states struggling with security challenges—per capita growth is projected to underperform the global average (including Burundi, Libya, South Sudan, Yemen). |
| Elevated debt levels remain a concern. | About two-fifths of LIDCs are assessed to be either at high risk of debt distress or already in debt distress. Reflecting adverse terms-of-trade shocks and accommodative fiscal positions, public debt as a share of GDP in LIDCs surged from a median of 35 percent in 2013 to 50 percent in 2017, before moderating slightly to 47 percent in 2018. In some countries, debt contracted by public entities outside central government also played a role. |
Policy Priorities for Emerging and Developing Economies
Both strong domestic policies and international cooperation are key to generating sustainable and inclusive growth
| Preconditions for vigorous and inclusive growth include both stability-oriented macroeconomic policies in the short term… | Given rising global risks, short-term priorities include strengthening resilience and reinforcing macroeconomic policy frameworks.
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| …and well-designed fiscal and structural policies for the medium to longer term… | Without robust and inclusive growth, the 2030 Sustainable Development Goals cannot be achieved. Both fiscal and structural policies have a role to play.
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| …but EMs and LIDCs also need support from the international community. | Global cooperation is vital to tackle common challenges and boost the growth and development prospects of EMDEs.
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| Preconditions for vigorous and inclusive growth include both stability-oriented macroeconomic policies in the short term… | Given rising global risks, short-term priorities include strengthening resilience and reinforcing macroeconomic policy frameworks.
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| …and well-designed fiscal and structural policies for the medium to longer term… | Without robust and inclusive growth, the 2030 Sustainable Development Goals cannot be achieved. Both fiscal and structural policies have a role to play.
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| …but EMs and LIDCs also need support from the international community. | Global cooperation is vital to tackle common challenges and boost the growth and development prospects of EMDEs.
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IMF Support
Help members achieve their development objectives, through policy advice, capacity building and financing
| Promote economic stability and growth through tailored policy advice | To assist member countries, the IMF will:
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| Supporting the 2030 agenda | The IMF will:
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| Provide financial support to countries implementing adjustment programs | For countries that face difficult adjustment challenges, the IMF will:
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| Promote global economic cooperation | The IMF will continue to promote a multilateral approach to addressing global economic challenges. Specifically, it will:
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| Promote economic stability and growth through tailored policy advice | To assist member countries, the IMF will:
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| Supporting the 2030 agenda | The IMF will:
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| Provide financial support to countries implementing adjustment programs | For countries that face difficult adjustment challenges, the IMF will:
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| Promote global economic cooperation | The IMF will continue to promote a multilateral approach to addressing global economic challenges. Specifically, it will:
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