World Economic Outlook - All Issues
World Economic Outlook, October 2019
Global Manufacturing Downturn, Rising Trade Barriers
October 2019
Full Report and Executive Summary
Global growth is forecast at 3.0 percent for 2019, its lowest level since 2008–09 and a 0.3 percentage point downgrade from the April 2019 World Economic Outlook. Growth is projected to pick up to 3.4 percent in 2020 (a 0.2 percentage point downward revision compared with April), reflecting primarily a projected improvement in economic performance in a number of emerging markets in Latin America, the Middle East, and emerging and developing Europe that are under macroeconomic strain. Yet, with uncertainty about prospects for several of these countries, a projected slowdown in China and the United States, and prominent downside risks, a much more subdued pace of global activity could well materialize. To forestall such an outcome, policies should decisively aim at defusing trade tensions, reinvigorating multilateral cooperation, and providing timely support to economic activity where needed. To strengthen resilience, policymakers should address financial vulnerabilities that pose risks to growth in the medium term. Making growth more inclusive, which is essential for securing better economic prospects for all, should remain an overarching goal.Chapter 1: Global Prospects and Policies
Over the past year, global growth has fallen sharply. Among advanced economies, the weakening has been broad based, affecting major economies (the United States and especially the euro area) and smaller Asian advanced economies. The slowdown in activity has been even more pronounced across emerging market and developing economies, including Brazil, China, India, Mexico, and Russia, as well as a few economies suffering macroeconomic and financial stress.Chapter 2: Closer Together or Further Apart? Subnational Regional Disparities and Adjustment in Advanced Economies
Subnational—within-country—regional disparities in real output, employment, and productivity in advanced economies have attracted greater interest in recent years against a backdrop of growing social and political tensions. Regional disparities in the average advanced economy have risen since the late 1980s, reflecting gains from economic concentration in some regions and relative stagnation in others. On average, lagging regions have worse health outcomes, lower labor productivity, and greater employment shares in agriculture and industry sectors than other within-country regions. Moreover, adjustment in lagging regions is slower, with adverse shocks having longer-lived negative effects on economic performance. Although much discussed, trade shocks—in particular greater import competition in external markets—do not appear to drive the differences in labor market performance between lagging and other regions, on average. By contrast, technology shocks—proxied by declines in the costs of machinery and equipment capital goods—raise unemployment in regions that are more vulnerable to automation, with more exposed lagging regions particularly hurt. National policies that reduce distortions and encourage more flexible and open markets, while providing a robust social safety net, can facilitate regional adjustment to adverse shocks, dampening rises in unemployment. Place-based policies targeted at lagging regions may also play a role, but they must be carefully calibrated to ensure they help rather than hinder beneficial adjustment.
Chapter 3: Reigniting Growth in Emerging Market and Low-Income Economies: What Role for Structural Reforms?
The pace of structural reforms in emerging market and developing economies was strong during the 1990s, but it has slowed since the early 2000s. Using a newly constructed database on structural reforms, this chapter finds that a reform push in such areas as governance, domestic and external finance, trade, and labor and product markets could deliver sizable output gains in the medium term. A major and comprehensive reform package might double the speed of convergence of the average emerging market and developing economy to the living standards of advanced economies, raising annual GDP growth by about 1 percentage point for some time. At the same time, reforms take several years to deliver, and some of them—easing job protection regulation and liberalizing domestic finance—may entail greater short-term costs when carried out in bad times; these are best implemented under favorable economic conditions and early in authorities’ electoral mandate. Reform gains also tend to be larger when governance and access to credit—two binding constraints on growth—are strong, and where labor market informality is higher—because reforms help reduce it. These findings underscore the importance of carefully tailoring reforms to country circumstances to maximize their benefits.