The World Economic Outlook (WEO) is a highly anticipated publication by the International Monetary Fund (IMF) that walks us through the most pivotal phenomena that shape the international economy. The publication will provide insights into where it might lead in the near future and recommend tailored policies for different countries. With enduring inflation rates, geopolitical turmoil, and COVID-19 recoveries that vary greatly from country to country.
WEO is ambitious in recalibrating growth expectations in the world
The IMF is projected to revise world growth to around 3%. This is a revision downwards of under 3% from the previous expectations. The main driver for this larger-than-expected downward length is poor growth performance from the advanced economies and very high growth, dysfunctional economic scenarios in the emerging economies with high debt-to-GDP ratios.
The official IMF publication page details forthcoming reports at the regional and sector levels. Among the most important will be the modelling of inflation, the fiscal actor role, and political factors that drive a wedge between economic growth, trade, and investment.
Assessing challenges to inflation and monetary policy
Inflation is the main focus of the report. Headline inflation has eased in a number of large economies, but core inflation continues to be very high. This is leading to continued tightening of the monetary policy.
The IMF is expected to look at the effectiveness of the policies and the impact on policy growth, employment, and financial stability.
Inflation expectations are still the primary reason interest rates are high in the US and Europe. However, the IMF is warning of the impact of policy tightening on investments and levels of consumer spending and the onset of recession in economies that are already weak.
The WEO is expected to focus on the need to support economic activity to reduce the expected economic impact.
The WEO is still expected to highlight the divide between developing economies
Some advanced economies are more resilient, but many low-income developing economies still face considerable challenges like high debt, reduced fiscal space, and weak access to global capital.
The need to specify aid to these economies, including debt reassessment, concessional financing, and capacity building, will be focused on by the IMF. Kristalina Georgieva, the head of the IMF, called for ‘inclusive’ recovery strategies.
She stated that:
“This reinforces the idea that recovery must be equitable and robust, and there must be investment in the people, infrastructure, and climate resilience of the economy.”
Geopolitical risk and fragmentation of the World economy
The increase in international tensions threatens global economic stability, and the IMF has the resources to address forms of fragmentation in trade and investment flows. The IMF will focus on the possibility of long-term changes in the structure of multilateral and global trade.
The global economy is shaped by shifting supply chains and trade blocs, and the IMF has the resources to assess the impacts on economic productivity and technological innovation in the real economy and the equitable and global economic growth dispersion in the sectors.
The IMF has been advocating for the shift in the world economy by closing the investment for public goods gap, i.e., health, education, and infrastructure, forming the international frontiers in the world economy. The IMF will focus on the ‘smart’ investment needed to grow the economy.
The IMF will conduct briefing sessions and have panel discussions, all of which are aligned with the first WEO publication. Their goal within these sessions will be to construct the sessions to bring together the primary market participants and the key public decision-makers in order to tackle the pillars of global economic endurance. The 2025 WEO will reflect the key global driving forces over the period, which is vital for the global market adjustment to the key determinants.