Is the world economy gaining momentum?
With buoyant financial markets and a long-awaited cyclical recovery in manufacturing and trade underway, global output growth is projected to rise from 3.1 percent in 2016 to 3.5 percent in 2017 and 3.6 percent in 2018. But binding structural impediments continue to hold back a stronger recovery, and the balance of risks remains tilted to the downside, especially over the medium term. With persistent structural problems—such as low productivity growth and high income inequality—pressures for inward-looking policies are increasing in advanced economies. These threaten global economic integration and the cooperative global economic order that has served the world economy, and especially emerging market and developing economies, well. Against this backdrop, economic policies have an important role to play in staving off downside risks and securing the recovery. On the domestic front, policies should aim to support demand and repair balance sheets where necessary and feasible; boost productivity, labor supply, and investment through structural reforms and supply-friendly fiscal measures; upgrade the public infrastructure; and support those displaced by structural transformations such as technological change and globalization. At the same time, credible strategies are needed in many countries to place public debt on a sustainable path. Adjusting to lower commodity revenues and addressing financial vulnerabilities remain key challenges for many emerging market and developing economies. A renewed multilateral effort is also needed to tackle common challenges in an integrated global economy.
Oya Celasun is Chief of the World Economic Studies Division of the IMF’s Research Departmentand supervises the team that prepares the World Economic Outlook report. Previously she was the IMF’s Mission Chief to Uruguay and worked as an Economist and Deputy Chief on the United States and Canada desks. She was published numerous academic and policy papers on issues related to public debt sustainability, sovereign risk and corporate debt, inflation in emerging market economies, and the costs of unpredictable aid flows in low-income countries.