Ms. Kristalina Georgieva, Executive Director of IMF. Credit: IMF
- Climate change is already having an impact on the global economy.
- Countries must ensure the vulnerable are protected in order to maintain social cohesion.
- Despite the note of optimism, significant risks remain.
Global economic growth is projected to be 3.3% in 2020 and 3.4% in 2021, according to the IMF’s latest World Economic Outlook, which has been unveiled in Davos.
This is higher than the estimated growth of 2.9% in 2019, pointing to a sluggish recovery and the tentative stabilization of the world economy.
There are signs that manufacturing activity and global trade have reached their lowest point, while the risk of a no-deal Brexit and a US-China trade war have lessened.
If these early signs of stabilization persist, both consumer and business spending are likely to improve, further boosting the economy.
Future fears
Despite the note of optimism, the latest predictions have been revised down slightly, reflecting negative surprises in a few emerging market economies, India in particular.
2019 was a challenging year
Image: IMF
Other risks which may dent future economic growth include rising geopolitical tensions, social unrest and more protectionist trade policies.
The IMF also highlights how weather-related disasters – including hurricanes in the Caribbean, bushfires in Australia and floods in eastern Africa – have already damaged the economy.
Overall, the IMF points out that downside risks remain prominent, and warns there could be a rapid shift in financial sentiment, if those risks become a reality.
What’s the World Economic Forum doing about climate change?
Climate change poses an urgent threat demanding decisive action. Communities around the world are already experiencing increased climate impacts, from droughts to floods to rising seas. The World Economic Forum’s Global Risks Report continues to rank these environmental threats at the top of the list.
To limit global temperature rise to well below 2°C and as close as possible to 1.5°C above pre-industrial levels, it is essential that businesses, policy-makers, and civil society advance comprehensive near- and long-term climate actions in line with the goals of the Paris Agreement on climate change.
The World Economic Forum’s Climate Initiative supports the scaling and acceleration of global climate action through public and private-sector collaboration. The Initiative works across several workstreams to develop and implement inclusive and ambitious solutions.
This includes the Alliance of CEO Climate Leaders, a global network of business leaders from various industries developing cost-effective solutions to transitioning to a low-carbon, climate-resilient economy. CEOs use their position and influence with policy-makers and corporate partners to accelerate the transition and realize the economic benefits of delivering a safer climate.
Policy priorities
In order to minimize these risks, the IMF has some specific policy recommendations. It calls for stronger multilateral cooperation, especially in the areas of trade, cybersecurity and the effort to curb climate change.
And in a time of widening unrest, it calls on countries to enhance inclusiveness, ensure that safety nets are protecting the vulnerable, and use governance structures to strengthen social cohesion.
These are the IMF forecasts for specific regions:
US: 2% growth in 2020, down from 2.3% in 2019
Euro area: 1.3% in 2020, up from 1.2% in 2019
Japan: 0.7% in 2020, down from 1% in 2019
India: 5.8% in 2020, up from 4.8% in 2019
China: 6% in 2020, down from 6.1% in 2019
Latin America: 1.6% in 2020, up from 0.1% in 2019
Sub-Saharan Africa: 3.5% in 2020, up from 3.3% in 2019
Middle East and Central Asia: 2.8% in 2020, up from 0.8% in 2019
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