The International Monetary Fund (IMF) has just lowered its growth forecast to 3% in 2019. This is 0.3 percentage points lower than the institution’s latest forecast in April. The Economic Outlook Report released in October refers to the slowest pace since the 2009 financial crisis (up from 3.6% in 2018).

Indeed, the main features of this new Economic Outlook Report were presented to the press on Tuesday, October 15, 2019, at a press conference hosted by IMF Economic Advisor Gita Gopinath.

Global growth rate

The Report indicates that growth in low-income developing countries remains robust, although the results are more heterogeneous among this group. Strong growth is expected in noncommodity exporting countries, such as Vietnam and Bangladesh. On the other hand, the performance of commodity exporting countries, notably Nigeria, is expected to remain poor.

However, the IMF warns, the risks of a downward revision of the outlook remain high. Indeed, trade barriers and rising geopolitical tensions, including risks related to Brexit, could further disrupt supply chains and affect confidence, investment and growth.

Gopinath: Heightened trade and geopolitical tensions, including Brexit-related risks, could further disrupt economic activity, and derail an already fragile recovery #WEO https://t.co/yuUgD56XJn pic.twitter.com/KSwCjL7g6d

— IMFLive (@IMFLive) October 15, 2019

These tensions, as well as other domestic policy uncertainties, could have a negative impact on the expected recovery in global growth.

From causes to solutions

IMF experts cite, as causes of the slowdown in growth, the consequence of increased trade barriers, increased trade uncertainty and geopolitical conditions, specific factors that cause macroeconomic tensions in several emerging countries, and structural factors, including low productivity and an aging population in advanced countries.

« In the context of a synchronized slowdown and an uncertain recovery, the global outlook remains fragile. With growth of 3%, leaders have no margin for error and must work together to urgently ease trade and geopolitical tensions. In this way, they can not only stimulate growth, but also catalyse the concerted solutions needed to improve the global trading system, » said Gita Gopinah.

I am attending right now the World Economic Outlook press conference at the 2019 @WorldBank & @IMFNews Annual Meetings in #WashingtonDC. pic.twitter.com/KWh2sVh79S

— Sele Yalaghuli (@SYalaghuli) October 15, 2019

For the IMF, it is also essential that governments continue to work together to address key issues, including climate change (with concrete solutions), international taxation, corruption and cyber security.

Proposed reform package

The world’s countries, including DR Congo, are thus encouraged to simultaneously undertake structural reforms aimed at increasing productivity, resilience and equity. The implementation of these reforms, which enhance human capital and make labour and product markets more flexible, are, according to the IMF, likely to help reverse the trend of increasing divergence between regions in advanced countries.

« The benefits of reforms are also greater when governance and access to credit, two key determinants of growth, are strong and when the informal nature of the labour market is more pronounced, as reforms contribute to its mitigation. Hence, the importance of carefully tailoring reforms to each country’s situation to maximize their benefits, » Gita Gopinath stressed.

Moreover, a recovery is expected in 2020. Indeed, global growth is expected to improve slightly to 3.4%, corresponding to a 0.2% downward revision of the IMF’s April projections. However, this recovery is not widespread but it remains precarious.

Growth in advanced countries is expected to slow to 1.7 per cent in 2019 and 2020, while growth in emerging and developing countries is expected to accelerate from 3.9 per cent in 2019 to 4.6 per cent in 2020.

Eric TSHIKUMA, Special Envoy