IMF Macroeconomic Outlook: What Are Colliding Global Shocks, And How Can They Be Avoided?
A blog article looking at IMF forecasts from 2015 and 2022, and possible impacts in the near future. This article performs a deep dive into global economic problems that are leading to multiple worldwide financial crises.
Background
The IMF released its latest global economic outlook (GEO) on Tuesday, and while the document isn’t packed with news, it does include a few notable takeaways. chief among them is that the world is currently experiencing a number of “colliding global shocks.” These shocks refer to events like China’s rebalancing away from investment and export-led growth, volatility in oil prices, and Brexit fallout.
In order to avoid these shocks from destabilizing the overall economy and causing more instability, the GEO recommends various policy adjustments by countries around the world. For example, policymakers should continue to focus on growth and jobs in advanced economies, bolster infrastructure spending in developing countries, and strengthen financial systems.
While these are all sound recommendations, implementing them will be a challenge. The GEO also delivers some sobering news about current global trends. For example,Average incomes for people in high-income countries are expected to only increase by 1 percent annually over the next five years—far below what is needed to maintain long-term peace and stability. And while low interest rates have helped reduce borrowing costs for businesses and consumers around the world, they have also led to greater inequality in income distribution as well as higher levels of debt across households.
What Is A Global Shocks?
The IMF has released their latest Macroeconomic Outlook report, highlighting the probability and magnitude of global shocks in 2019. The main focus of this report is on the potential for a large-scale global recession, due to a number of converging global risks. In particular, the report warns that two key global risks are growing trade protectionism and Excessive debt levels.
Global trade has been on an upwards trajectory in recent years, but there is a risk that this trend could be reversed if countries begin to erect barriers to trade. This would lead to increased costs for businesses and Consumers, which would likely result in a global recession.
Similarly, high levels of debt are another major risk factor for a global recession. If financial markets tighten up as a result of excessive debt levels, this could trigger a worldwide economic downturn. The IMF warns that debts have reached “unsustainable” levels in many countries, and suggest that governments should take action to address the issue before it gets too dangerous.
These are just two examples of the many converging risks that could lead to a global recession in 2019. By being aware of these threats, policymakers can take steps to prevent an economy from crashing down.
The Four Global Shocks That Collided And Resulted In IMF Cuts
The IMF released its latest macroeconomic outlook on October 3rd, and the headline figure is that global growth will “improve only modestly” in 2019 and 2020. This comes despite a number of potential shocks (below) colliding and resulting in unprecedented IMF cuts to global debt levels.
One reason for this is that trade tensions between the US, China, and other countries are keeping investment low, while geopolitical risks are also rising. Countries such as Turkey, Venezuela, and the Philippines are all struggling with high levels of inflation and debt respectively. Meanwhile, over in Europe, a number of member states are experiencing sluggish growth due to structural factors (like an aging population).
Despite these differences though, all four global shocks have something in common: they represent potential vulnerabilities that could cause long-term problems for economies if not addressed quickly. The IMF has called for accelerated action to reduce these vulnerabilities – but where will this money come from?
How Do We Avoid These Four Global Shocks?
Many people believe that the global economy is in a recession, while others claim it’s just slowly weakening. However, there is no one clear answer as to whether the global economy is in a recession or not. What we can say for certain is that global economic conditions are volatile and could change rapidly. Here are four possible global shocks that could cause major disruptions in the near future:
1) A sharp increase in interest rates in the United States
2) A severe recession in China
3) A sharp deterioration in the Eurozone sovereign debt crisis
4) outbreaks of major pandemics across multiple countries
Conclusion
The global economy is currently under siege from a number of simultaneous and interacting shocks, many of which are ones that policymakers have been trying to avoid for years. Unfortunately, these shocks are proving to be much harder to dodge than anyone predicted, with consequences that could have far-reaching implications for both the global economic outlook and the political landscape. In this article, we examine each of these shocks in detail, outlining what they are, how they’re impacting the economy right now, and ways in which policymakers can try to mitigate their effects.