The International Monetary Fund (IMF) has announced that G20 nations, many of which are the largest economies globally, are facing the weakest growth outlook in the medium term since the 2009 world financial crisis. Recently, the IMF predicted that the world’s leading G20 economies will grow at only 2.9% per year through to 2030, a strikingly low growth rate relative to previous decades.
G20 nations are showing a weak economic growth rate, according to the IMF
The IMF also foresees growth among the G20’s advanced economies at 1.4% per annum until 2030. The world’s emerging economies will likely grow at a rate marginally higher than the advanced economies at a cumulative rate of 3.9%. The IMF attributes the cause of the world’s growth problems to stagnation, primarily due to the chronic slowdown of the global economy.
According to the IMF, the world stagnation was primarily due to rising geopolitical tensions, fragmentation of trade, sluggish cross-border policies, and overall global economic policies. These were areas previously driving growth before shifts made the conditions less favorable.
In 2009, there was a recession and a global crisis, and it was ultimately resolved. However, the conditions around the collapse of multiple financial institutions in the world of 2009 were different in several ways, with the IMF noting increased structural, fiscal, and demographic risks.
Today is different. The IMF has predicted that the G20 may suffer from a prolonged period of stagnation if changes in fiscal policy are not implemented soon. Economists and policymakers see stagnation and the growing inequality of the world’s economies as impediments to sustainable development and the creation of new, wealthier societies among weaker nations.
It’s not all bad news: The IMF says there’s potential to alter pessimistic scenarios
The IMF’s predictions under the current scenario are mainly negative. However, countries can change their projected economic paths by being less vulnerable to downside risks. The IMF has fleshed out a number of structural frameworks that can be applied. Increased investments in green technologies would generate, as the IMF would colloquially put it, “expanded ecosystems” and increased “technologically advanced, productive workforces.”
These are some of the IMF’s recommendations:
- Encouraging fiscal frameworks that would create and maintain a debt cycle
- Investment in digital innovation and infrastructure to create and sustain a demand-driven market
- An injection of resources into the labour market will boost the participation of the economically inactive in the market
- The synergistic investment and cooperative partnerships will work to eliminate barriers and build a more cohesive and resilient market
The IMF says emerging markets need to monitor governance, geopolitics, and climate
Emerging markets are predicted to supersede advanced economies in growth; however, this is not without peril. Emerging economies are even more vulnerable to geopolitical conflicts, disruptive climate phenomena, and volatile governance. Without sufficient public sector capacity, the IMF warns, even the most pragmatic development policies will be thwarted.
Nevertheless, the growth potential is not mere fantasy, both in advanced consumers and emerging markets, and is closely linked to the prospects of new investments in digital technologies, clean energy, and integration.
If growth remains indifferent, we will forgo the means to combat the climate crisis, poverty, technological upheaval, and an array of other global challenges. The potential for social unrest will arise from the “opportunity” costs of a rising population and stagnant wages. The intricately linked global economy poses a continuous risk to global financial security. The more people we have, the more global crisis shocks such as pandemics, war, and climate change we will encounter, which will stretch the already scarce public resources.
Whatever these G20 countries decide now will shape how their citizens live in the future, and the IMF says that these decisions need to be treated with utmost priority. Reshaping these overwhelming challenges as the world’s Engine of Growth, the G20’s primary responsibility will be to transform global economic stagnation into global economic prosperity.
