IMF’s Economic Outlook: Regional Inequality And Weak Global Growth


The International Monetary Fund has stated that the global economy is facing a synchronized slowdown, and has accordingly reduced its growth projections to just 3 percent, the slowest pace of economic expansion since the Global Financial Crisis of 2008.  This is occurring in the context of weakening industrial production, escalating trade risks and increasing geopolitical risks, all of which contribute to the current environment of indiscriminatory economic weakening.  Developed and developing states alike have been impacted, as advanced economies have slowed down to 1.7 percent for 2019 compared to 2.3 percent in 2018. On the other hand, emerging economies have slowed down from 4.5 percent growth in 2018 to an estimated 3.9 percent this year, a reflection of the structural slowdown of China, as well as trade and domestic policy uncertainties. The implications are substantial, from financial disruptions to reversal of capital flows in emerging market economies and entrenchment of low inflation in advanced economies. In order to understand these global issues, it is essential to analyze the regional inequality in advanced nations, which affects both the economic and political landscapes. Internal disparities have only risen since the 1980’s: lagging regions tend to be rural, specialized in traditional occupations (agriculture, mining), have worse health outcomes, and lower labour productivity. This has acted as a catalyst for a shift toward inward-looking policies and away from pro-growth reforms that will be helpful for mitigating the current economic slowdown.

Gita Gopinath, head of the International Monetary Fund’s Research Department, has stated that “with a synchronized slowdown and uncertain recovery, the global outlook remains precarious. At 3 percent growth, there is no room for policy mistakes and an urgent need for policymakers to cooperatively deescalate trade and geopolitical tensions,” further adding that “countries should simultaneously undertake structural reforms to raise productivity, resilience, and equity… reforms that raise human capital and improve labour and product market flexibility can help reverse a trend of growing divergence across regions.” All of these concerns are exemplified by the US-China Trade War, in which the Trump administration has highlighted how China’s chronically large trade surplus was depressing job creation, consequently striking a nerve with the population of the aforementioned economically lagging regions and creating the conditions under which the trade war was born. The tension is expected to reduce the global GDP by a cumulative 0.8% in 2020, with the trade war having done significant damage to the U.S. and global economies and the higher tariffs bringing global trade to a relative halt.

There is undoubtably a need for policymakers to cooperatively deescalate trade and geopolitical tensions to combat the lack of global growth. The United States and China specifically must undo the trade barriers put in place and reduce geopolitical anxieties to help boost confidence and reinvigorate investment, manufacturing, and trade. The reality is that if the two powerful state actors are faltering economically, there will be a profound effect on the global economy. Additionally, states should address regional inequality as it is a driver of internal insecurity and consequently insecure policy decisions. To combat this, governments must implement flexibility in labour markets, making it easier for workers to retrain, move, and adapt to economic declines, as well as employ policies that encourage uniformity of the basic necessities.

Zac Williams

Junior Correspondent at The Organization for World Peace
Currently studying at the University of Queensland and in the process of completing a Bachelor of International Studies, majoring in both international relations and french.I possess a deep interest in civilizational politics, particularly in the former Yugoslavia, as well as interest in the role of multilateral institutions in the international system.
Zac Williams

About Zac Williams

Currently studying at the University of Queensland and in the process of completing a Bachelor of International Studies, majoring in both international relations and french. I possess a deep interest in civilizational politics, particularly in the former Yugoslavia, as well as interest in the role of multilateral institutions in the international system.