There were positive surprises to growth in advanced economies, but weaker-than-expected activity in emerging market and developing economies. Priorities across all economies are to enhance inclusion, strengthen resilience, and address constraints on potential output growth.Īgainst a difficult backdrop that included intensified US-China trade and technology tensions as well as prolonged uncertainty on Brexit, momentum in global activity remained soft in the first half of 2019. If growth weakens relative to the baseline, macroeconomic policies will need to turn more accommodative, depending on country circumstances. Fiscal policy should balance multiple objectives: smoothing demand as needed, protecting the vulnerable, bolstering growth potential with spending that supports structural reforms, and ensuring sustainable public finances over the medium term. With subdued final demand and muted inflation, accommodative monetary policy is appropriate in advanced economies, and in emerging market and developing economies where expectations are anchored. Specifically, countries should not use tariffs to target bilateral trade balances or as a substitute for dialogue to pressure others for reforms.
The pressing needs include reducing trade and technology tensions and expeditiously resolving uncertainty around trade agreements (including between the United Kingdom and the European Union and the free trade area encompassing Canada, Mexico, and the United States).
GDP releases so far this year, together with generally softening inflation, point to weaker-than-anticipated global activity.
Since the April World Economic Outlook (WEO) report, the United States further increased tariffs on certain Chinese imports and China retaliated by raising tariffs on a subset of US imports.