News Release - The Challenges to Sustaining the Global Recovery - IMF First Deputy Managing Director David Lipton - Munich, Germany October 23, 2017
Good afternoon. Thank you for the kind introduction. - I am always happy to visit Germany—a country that provides an important voice in the international community for responsible economic policies.
I would like to set the stage for your discussions today with an overview of the global economy—recent positive developments and some perspectives on longer-term trends that we need to address. I’ll point toward some practical solutions where I can—and will—highlight some looming issues that require more attention.
The bottom line is that the global recovery is strengthening. That provides an environment of opportunity to address key policy issues that can help support stronger and more sustainable growth—and foster the financial stability essential to the health of the global economy.
The IMF has just released its latest World Economic Outlook, which we update on a quarterly basis. It forecasts 3.6 percent global growth this year and 3.7 percent next year. That is well above the 3.2 percent we saw in 2016.
This is good, but not enough. Before talking about what’s missing, let’s review the progress.
Consumption and Investment
The sources of strength this time include both consumption and investment. The strengthening of investment is important, because many companies have been reticent about making physical investments since the Global Financial Crisis. Investment, which is very import intensive, is contributing to an acceleration of trade, which is a way of spreading the beneficial effects of recovery across the global economy. For the first time in several years, trade is growing faster than GDP. That is most welcome.
Another important development: the recovery has become more broad-based. The advanced economies are finally all growing, led by the euro area and Japan. This, too, we haven’t seen since the crisis. We also have stronger growth across many emerging market countries, especially China, emerging Europe, and Russia.
We see Germany growing at 2 percent this year, and moderating to 1.8 percent in 2018. The U.S. is also growing—at a little over two percent. But we’ve reduced that forecast a bit because of uncertainty about the fiscal stimulus under discussion in Washington. We also have downgraded the UK forecast.
The countries contributing to the recovery add up to about 75 percent of the world, measured by GDP. Not bad. But that also leads us to what is absent.
The 25 percent of the world that is not growing represents a broad swath, in fact a large number of the developing countries. This includes some emerging market countries and the commodity exporters, especially oil-rich countries. In fact, some 46 countries are experiencing falling GDP growth in per capita terms.
Many countries are still adjusting to the sharp fall of commodities prices in 2015. This is especially the case in sub-Saharan Africa, where several countries are trying to return to growth. But they are a long way from the rapid expansion in the years of the commodities boom. This is one of the important policy challenges I referred to a moment ago.
This gap between the countries that are partaking of the recovery and those that are not tells us that this recovery is simply not strong enough. That, broadly speaking, is because many countries have not yet taken the policy steps needed to return to growth.
It also important to point out that, in terms of the benefits of the recovery, there are also disparities within many of the countries that are growing. For example, across the advanced economies, real wage growth has remained low and many people have lost ground since 2008.
Some of that stems from the lingering impact of the global crisis. Some can be blamed on technological change and trade. Whatever the cause, we have witnessed an increase in inequality that has helped breed populist resentment against globalization, migration, and change in general.
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