IMF and World Bank looked into crystal ball for world’s economies this week

At meetings held this time of year every year, the IMF and World Bank discussed with policy makers from around the world how they see the future for the world’s economies –and what they think the main risks and opportunities are.  The Eurozone economies and the US economy, among others, are growing more quickly than any time since before the global financial crisis hit nearly ten years ago.  This is good news. But while these international institutions generally predict that the largest economies of the world will continue to grow at a good rate, they see some risks.  

These potential risks include the negative effects that further increases in interest rates by the Federal Reserve in the US would have on emerging economies—by causing some of the finance from international investors flowing to these economies looking for higher returns to return back to the US when the US Federal Reserve raises rates again. There are also political risks from the possibility of conflict in Korea and the risk of more protectionist trade policies in the US slowing trade flows and therefore hurting global economic growth. And the head of the IMF called on more economies to do structural reforms to their fiscal policies—for example to raise more money from taxes—while their economies are strong and people won’t feel the burden as much.

There were also remarks from the leaders of the World Bank and IMF that, even though the global economy has been growing at a healthy rate, there is a need for more inclusive growth—that helps more poor people enjoy the growth benefits also. And in some of the large advanced economies including the US, wages and inflation are growing slowly.

My own view is that it must be hard in reality for two international institutions to be able to predict the future accurately for more than one hundred economies. They may have some idea of the risks and possible opportunities. But they can’t possibly know in advance about every possible political crisis that could brew in countries around the world and affect economies. It’s also difficult to predict the next big innovation and how that could affect growth of economies.

https://www.bloomberg.com/news/articles/2017-10-12/global-economy-still-has-room-to-grow-provided-reforms-are-made

https://www.reuters.com/article/us-global-economy-outlook/growth-gathering-momentum-but-wheres-the-inflation-idUSKBN1CI1KL

https://www.reuters.com/article/us-imf-g20/global-policymakers-grapple-with-half-baked-recovery-short-of-wage-growth-idUSKBN1CJ0QX