World Economic Outlook, October 2019: October 2019, global manufacturing downturn, rising trade barriers (World economic and financial surveys)

208 Pages·2020·11.889 MB·English

by  International Monetary Fund

INTERNATIONAL MONETARY FUND
WORLD
ECONOMIC
OUTLOOK
Global Manufacturing Downturn,
Rising Trade Barriers
2019
OCT
©International Monetary Fund. Not for Redistribution
©2019 International Monetary Fund

Cover and Design: IMF CSF Creative Solutions Division
Composition: AGS, An RR Donnelley Company
Cataloging-in-Publication Data
Joint Bank-Fund Library
Names: International Monetary Fund.
Title: World economic outlook (International Monetary Fund)
Other titles: WEO | Occasional paper (International Monetary Fund) | World economic and
financial surveys.
Description: Washington, DC : International Monetary Fund, 1980- | Semiannual | Some
issues also have thematic titles. | Began with issue for May 1980. | 1981-1984: Occasional
paper / International Monetary Fund, 0251-6365 | 1986-: World economic and financial
surveys, 0256-6877.
Identifiers: ISSN 0256-6877 (print) | ISSN 1564-5215 (online)
Subjects: LCSH: Economic development—Periodicals. | International economic relations—
Periodicals. | Debts, External—Periodicals. | Balance of payments—Periodicals. |
International finance—Periodicals. | Economic forecasting—Periodicals.
Classification: LCC HC10.W79

HC10.80
ISBN 978-1-51350-821-4 (English Paper)
978-1-51351-617-2 (English ePub)
978-1-51351-616-5 (English PDF)
The World Economic Outlook (WEO) is a survey by the IMF staff published twice a
year, in the spring and fall. The WEO is prepared by the IMF staff and has benefited
from comments and suggestions by Executive Directors following their discussion of
the report on October 3, 2019. The views expressed in this publication are those of the
IMF staff and do not necessarily represent the views of the IMF’s Executive Directors
or their national authorities.
Recommended citation: International Monetary Fund. 2019. World Economic Outlook:
Global Manufacturing Downturn, Rising Trade Barriers. Washington, DC, October.
Publication orders may be placed online, by fax, or through the mail:
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P.O. Box 92780, Washington, DC 20090, USA
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©International Monetary Fund. Not for Redistribution
CONTENTS
Assumptions and Conventions ix
Further Information xi
Data xii
Preface xiii
Foreword xiv
Executive Summary xvi
Chapter 1. Global Prospects and Policies 1
Subdued Momentum, Weak Trade and Industrial Production 1
Weakening Growth 2
Muted Inflation 3
Volatile Market Sentiment, Monetary Policy Easing 5
Global Growth Outlook: Modest Pickup amid Difficult Headwinds 7
Growth Forecast for Advanced Economies 12
Growth Forecast for Emerging Market and Developing Economies 13
Inflation Outlook 16
External Sector Outlook 16
Risks: Skewed to the Downside 19
Policy Priorities 22
Scenario Box 1.1. Implications of Advanced Economies Reshoring Some Production 29
Scenario Box 1.2. Trade Tensions: Updated Scenario 31
Box 1.1. The Global Automobile Industry: Recent Developments and Implications for
the Global Outlook 34
Box 1.2. The Decline in World Foreign Direct Investment in 2018 38
Box 1.3. Global Growth Forecast: Assumptions on Policies, Financial Conditions, and
Commodity Prices 41
Box 1.4. The Plucking Theory of the Business Cycle 43
Special Feature: Commodity Market Developments and Forecasts 45
Box 1.SF.1. What’s Happening with Global Carbon Emissions? 56
References 63
Online Annex
Special Feature Online Annex
Chapter 2. Closer Together or Further Apart? Within-Country Regional Disparities and Adjustment in
Advanced Economies 65
Introduction 65
Regional Development and Adjustment: A Primer 70
Patterns of Regional Disparities in Advanced Economies 71
Regional Labor Market Adjustment in Advanced Economies 73
Regional Labor Mobility and Factor Allocation: Individual and Firm-Level Evidence 76
Summary and Policy Implications 78
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WORLD ECONOMIC OUTLOOK: GLOBAL MANUFACTURING DOWNTURN, RISING TRADE BARRIERS
Box 2.1. Measuring Subnational Regional Economic Activity and Welfare 80
Box 2.2. Climate Change and Subnational Regional Disparities 82
Box 2.3. The Persistent Effects of Local Shocks: The Case of Automotive Manufacturing
Plant Closures 84
Box 2.4. Place-Based Policies: Rethinking Fiscal Policies to Tackle Inequalities
within Countries 86
References 88
Online Annexes
Annex 2.1. Variables, Data Sources, and Sample Coverage
Annex 2.2. Calculation and Decomposition of Income Inequality
Annex 2.3. Shift-Share Analysis of Regional Labor Productivity
Annex 2.4. Counterfactual Exercise for Labor Productivity Changes in Lagging versus
Other Regions
Annex 2.5. Regional Labor Market Effects of Local Labor Demand Shocks: Trade and
Technology Shocks
Annex 2.6. Firm-Level Analysis of Capital Allocative Efficiency
Chapter 3. Reigniting Growth in Low-Income and Emerging Market Economies: What Role Can Structural
Reforms Play? 93
Introduction 93
Structural Policy and Reform Patterns in Emerging Market and Developing Economies 97
The Macroeconomic Effects of Reforms in Emerging Market and Developing Economies 101
Accounting for Differences across Countries 106
Summary and Policy Implications 110
Box 3.1. The Political Effects of Structural Reforms 113
Box 3.2. The Impact of Crises on Structural Reforms 115
References 117
Online Annexes
Annex 3.1. Data Sources and Sample
Annex 3.2. Empirical Analysis—Methodological Details and Robustness Checks
Annex 3.3. Model Analysis
Statistical Appendix 121
Assumptions 121
What’s New 122
Data and Conventions 122
Country Notes 123
Classification of Countries 124
General Features and Composition of Groups in the World Economic Outlook Classification 125
Table A. Classification by World Economic Outlook Groups and Their Shares in Aggregate
GDP, Exports of Goods and Services, and Population, 2018 126
Table B. Advanced Economies by Subgroup 127
Table C. European Union 127
Table D. Emerging Market and Developing Economies by Region and Main Source of
Export Earnings 128
Table E. Emerging Market and Developing Economies by Region, Net External Position,
and Status as Heavily Indebted Poor Countries and Low-Income Developing Countries 129
Table F. Economies with Exceptional Reporting Periods 131
Table G. Key Data Documentation 132
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contents
Box A1. Economic Policy Assumptions Underlying the Projections for Selected Economies 142
List of Tables
Output (Tables A1–A4) 147
Inflation (Tables A5–A7) 154
Financial Policies (Table A8) 159
Foreign Trade (Table A9) 160
Current Account Transactions (Tables A10–A12) 162
Balance of Payments and External Financing (Table A13) 169
Flow of Funds (Table A14) 173
Medium-Term Baseline Scenario (Table A15) 176
World Economic Outlook, Selected Topics 177
IMF Executive Board Discussion of the Outlook, October 2019 187
Tables
Table 1.1. Overview of the World Economic Outlook Projections 10
Table 1.SF.1. Official Gold Reserves 50
Table 1.SF.2. Precious Metals Production, 2016–18 50
Table 1.SF.3. Relative Rarity 52
Table 1.SF.4. World Average Inflation Betas 54
Table 1.SF.5. Determinants of One-Month Return on Precious Metals 54
Table 1.SF.6. Asset Returns Associated with Largest Single-Day Changes in the S&P
500 Index 55
Annex Table 1.1.1. European Economies: Real GDP, Consumer Prices, Current Account
Balance, and Unemployment 57
Annex Table 1.1.2. Asian and Pacific Economies: Real GDP, Consumer Prices, Current
Account Balance, and Unemployment 58
Annex Table 1.1.3. Western Hemisphere Economies: Real GDP, Consumer Prices,
Current Account Balance, and Unemployment 59
Annex Table 1.1.4. Middle East and Central Asia Economies: Real GDP, Consumer Prices,
Current Account Balance, and Unemployment 60
Annex Table 1.1.5. Sub-Saharan African Economies: Real GDP, Consumer Prices,
Current Account Balance, and Unemployment 61
Annex Table 1.1.6. Summary of World Real per Capita Output 62
Table 2.4.1. Examples of Place-Based Policies 86
Online Tables—Statistical Appendix
Table B1. Advanced Economies: Unemployment, Employment, and Real GDP per Capita
Table B2. Emerging Market and Developing Economies: Real GDP
Table B3. Advanced Economies: Hourly Earnings, Productivity, and Unit Labor Costs
in Manufacturing
Table B4. Emerging Market and Developing Economies: Consumer Prices
Table B5. Summary of Fiscal and Financial Indicators
Table B6. Advanced Economies: General and Central Government Net
Lending/Borrowing and General Government Net Lending/Borrowing Excluding
Social Security Schemes
Table B7. Advanced Economies: General Government Structural Balances
Table B8. Emerging Market and Developing Economies: General Government Net
Lending/Borrowing and Overall Fiscal Balance
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WORLD ECONOMIC OUTLOOK: GLOBAL MANUFACTURING DOWNTURN, RISING TRADE BARRIERS
Table B9. Emerging Market and Developing Economies: General Government Net
Lending/Borrowing
Table B10. Selected Advanced Economies: Exchange Rates
Table B11. Emerging Market and Developing Economies: Broad Money Aggregates
Table B12. Advanced Economies: Export Volumes, Import Volumes, and Terms of Trade
in Goods and Services
Table B13. Emerging Market and Developing Economies by Region: Total Trade in Goods
Table B14. Emerging Market and Developing Economies by Source of Export Earnings:
Total Trade in Goods
Table B15. Summary of Current Account Transactions
Table B16. Emerging Market and Developing Economies: Summary of External Debt
and Debt Service
Table B17. Emerging Market and Developing Economies by Region: External Debt
by Maturity
Table B18. Emerging Market and Developing Economies by Analytical Criteria: External
Debt by Maturity
Table B19. Emerging Market and Developing Economies: Ratio of External Debt to GDP
Table B20. Emerging Market and Developing Economies: Debt-Service Ratios
Table B21. Emerging Market and Developing Economies, Medium-Term Baseline
Scenario: Selected Economic Indicators
Figures
Figure 1. GDP Growth: World and Group of Four xvii
Figure 1.1. Global Activity Indicators 2
Figure 1.2. Contribution to Global Imports 2
Figure 1.3. Global Investment and Trade 3
Figure 1.4. Spending on Durable Goods 3
Figure 1.5. Global Purchasing Managers’ Index and Consumer Confidence 4
Figure 1.6. Global Inflation 4
Figure 1.7. Wages, Unit Labor Costs, and Labor Shares 5
Figure 1.8. Commodity Prices 5
Figure 1.9. Advanced Economies: Monetary and Financial Market Conditions 6
Figure 1.10. Emerging Market Economies: Interest Rates and Spreads 7
Figure 1.11. Emerging Market Economies: Equity Markets and Credit 8
Figure 1.12. Emerging Market Economies: Capital Flows 8
Figure 1.13. Real Effective Exchange Rate Changes, March 2019–September 2019 9
Figure 1.14. Global Growth 12
Figure 1.15. Emerging Market and Developing Economies:
Per Capita Real GDP Growth 15
Figure 1.16. Sub-Saharan Africa: Population in 2018 and Projected Growth Rates in
GDP per Capita, 2019–24 16
Figure 1.17. Global Current Account Balance 17
Figure 1.18. Current Account Balances in Relation to Economic Fundamentals 18
Figure 1.19. Net International Investment Position 18
Figure 1.20. Tech Hardware Supply Chains 20
Figure 1.21. Policy Uncertainty and Trade Tensions 21
Figure 1.22. Geopolitical Risk Index 21
Figure 1.23. Probability of One-Year-Ahead Global Growth of Less than 2.5 Percent 22
Scenario Figure 1.1.1. Advanced Economies Reshoring 29
Scenario Figure 1.2.1. Real GDP 32
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Figure 1.1.1. Global Vehicle Industry: Share of Total, 2018 34
Figure 1.1.2. Global Vehicle Industry: Structure of Production, 2014 35
Figure 1.1.3. Global Vehicle Production 36
Figure 1.1.4. World Passenger Vehicle Sales and Usage 36
Figure 1.2.1. Advanced Economies: Financial Flows 38
Figure 1.2.2. Foreign Direct Investment Flows 39
Figure 1.2.3. Emerging Markets: Financial Flows 40
Figure 1.3.1. Forecast Assumptions: Fiscal Indicators 42
Figure 1.3.2. Commodity Price Assumptions and Terms-of-Trade Windfall Gains
and Losses 42
Figure 1.4.1. An Illustration of the Plucking Theory 43
Figure 1.4.2. Unemployment Dynamics in Advanced Economies 44
Figure 1.SF.1 Commodity Market Developments 46
Figure 1.SF.2. Gold and Silver Prices 49
Figure 1.SF.3. Macro Relevance of Precious Metals 51
Figure 1.SF.4. Share of Total Demand 52
Figure 1.SF.5. Correlation: Precious Metals, Copper, and Oil 53
Figure 1.SF.6. Precious Metals versus Consumer Price Index Inflation 53
Figure 1.SF.1.1. Contribution to World Emissions, by Location 56
Figure 1.SF.1.2. Contribution to World Emissions, by Source 56
Figure 2.1. Subnational Regional Disparities and Convergence over Time 66
Figure 2.2. Distribution of Subnational Regional Disparities in Advanced Economies 66
Figure 2.3. Subnational Regional Unemployment and Economic Activity in Advanced
Economies, 1999–2016 67
Figure 2.4. Demographics, Health, Human Capital, and Labor Market Outcomes in
Advanced Economies: Lagging versus Other Regions 68
Figure 2.5. Inequality in Household Disposable Income within
Advanced Economies 70
Figure 2.6. Subnational Regional Disparities in Real GDP per Capita 71
Figure 2.7. Shift-Share Variance Decomposition, by Country, 2003–14 72
Figure 2.8. Sectoral Labor Productivity and Employment Shares: Lagging versus
Other Regions 73
Figure 2.9. Labor Productivity: Lagging versus Other Regions 74
Figure 2.10. Regional Effects of Import Competition Shocks 75
Figure 2.11. Regional Effects of Automation Shocks 76
Figure 2.12. Regional Effects of Trade and Technology Shocks Conditional on
National Policies 77
Figure 2.13. Subnational Regional Migration and Labor Mobility 78
Figure 2.14. Effects of National Structural Policies on Subnational Regional Dispersion
of Capital Allocative Efficiency 78
Figure 2.1.1. Subnational Regional Disparities: Before and after Regional Price Adjustment 80
Figure 2.2.1. Marginal Effect of 1°C Increase in Temperature on Sectoral Labor Productivity 82
Figure 2.2.2. Change in Labor Productivity of Lagging versus Other Regions Due to
Projected Temperature Increases between 2005 and 2100 83
Figure 2.3.1. Associations between Automotive Manufacturing Plant Closures and
Unemployment Rates 84
Figure 2.4.1. Effects of Fiscal Redistribution by Conventional versus Spatially Targeted
Means-Tested Transfers 87
Figure 3.1. Speed of Income-per-Capita Convergence in Emerging Markets and
Low-Income Developing Countries 94
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WORLD ECONOMIC OUTLOOK: GLOBAL MANUFACTURING DOWNTURN, RISING TRADE BARRIERS
Figure 3.2. Reform Intensity and Speed of Income-per-Capita Convergence in
Selected Economies 94
Figure 3.3. Overall Reform Trends 98
Figure 3.4. Reform Trends, by Area 99
Figure 3.5. Overall Reform Trends across Different Geographical Regions 100
Figure 3.6. Regulatory Indices, by Country Income Groups 100
Figure 3.7. Regulatory Indices, by Geographical Regions 101
Figure 3.8. Average Effects of Reforms 102
Figure 3.9. Industry-Level Effect of Domestic and External Finance Reforms on Output 104
Figure 3.10. Output Gains from Major Historical Reforms: Model-Based versus
Empirical Estimates 106
Figure 3.11. Effects of Reforms: The Role of Macroeconomic Conditions 107
Figure 3.12. Effects of Reforms on Output: The Role of Informality 108
Figure 3.13. Model-Implied Gains from Reforms: The Role of Informality 109
Figure 3.14. Effect of Reforms on Informality 109
Figure 3.15. Effects of Reforms on Output: The Role of Governance 110
Figure 3.16. Gain from Packaging Domestic Finance and Labor Market Reforms 111
Figure 3.1.1. The Effect of Reform on Electoral Outcomes 114
Figure 3.1.2. The Effect of Reform on Vote Share: The Role of Economic Conditions 114
Figure 3.2.1. The Effect of Crises on Structural Reforms 116
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ASSUMPTIONS AND CONVENTIONS
A number of assumptions have been adopted for the projections presented in the World Economic Outlook (WEO).
It has been assumed that real effective exchange rates remained constant at their average levels during July 26 to
August 23, 2019, except for those for the currencies participating in the European exchange rate mechanism II
(ERM II), which are assumed to have remained constant in nominal terms relative to the euro; that established
policies of national authorities will be maintained (for specific assumptions about fiscal and monetary policies for
selected economies, see Box A1 in the Statistical Appendix); that the average price of oil will be $61.78 a barrel
in 2019 and $57.94 a barrel in 2020 and will remain unchanged in real terms over the medium term; that the
six-month London interbank offered rate (LIBOR) on US dollar deposits will average 2.3 percent in 2019 and
2.0 percent in 2020; that the three-month euro deposit rate will average –0.4 percent in 2019 and –0.6 in 2020; and
that the six-month Japanese yen deposit rate will yield, on average, 0.0 percent in 2019 and –0.1 percent in 2020.
These are, of course, working hypotheses rather than forecasts, and the uncertainties surrounding them add to the
margin of error that would, in any event, be involved in the projections. The estimates and projections are based on
statistical information available through September 30, 2019.
The following conventions are used throughout the WEO:
. . . to indicate that data are not available or not applicable;
– between years or months (for example, 2018–19 or January–June) to indicate the years or months
covered, including the beginning and ending years or months; and
/ between years or months (for example, 2018/19) to indicate a fiscal or financial year.
“Billion” means a thousand million; “trillion” means a thousand billion.
“Basis points” refers to hundredths of 1 percentage point (for example, 25 basis points are equivalent to ¼ of
1 percentage point).
Data refer to calendar years, except in the case of a few countries that use fiscal years. Please refer to Table F in
the Statistical Appendix, which lists the economies with exceptional reporting periods for national accounts and
government finance data for each country.
For some countries, the figures for 2018 and earlier are based on estimates rather than actual outturns. Please
refer to Table G in the Statistical Appendix, which lists the latest actual outturns for the indicators in the national
accounts, prices, government finance, and balance of payments indicators for each country.
What is new in this publication:
• Mauritania redenominated its currency in January 2018 by replacing 10 old Mauritanian ouguiya (MRO) with
1 new Mauritanian ouguiya (MRU). Local currency data for Mauritania are expressed in the new currency
beginning with the October 2019 WEO database.
• São Tomé and Príncipe redenominated its currency in January 2018 by replacing 1,000 old São Tomé and
Príncipe dobra (STD) with 1 new São Tomé and Príncipe dobra (STN). Local currency data for São Tomé and
Príncipe are expressed in the new currency beginning with the October 2019 WEO database.
• Beginning with the October 2019 WEO, the regional group Commonwealth of Independent States (CIS) is dis-
continued. Four of the CIS economies (Belarus, Moldova, Russia, and Ukraine) are added to the regional group
Emerging and Developing Europe. The remaining eight economies—Armenia, Azerbaijan, Georgia, Kazakhstan,
Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan, which comprise the regional subgroup Caucasus and
Central Asia (CCA)—are combined with Middle East, North Africa, Afghanistan, and Pakistan (MENAP)
to form the new regional group Middle East and Central Asia (MECA).
In the tables and figures, the following conventions apply:
• If no source is listed on tables and figures, data are drawn from the WEO database.
• When countries are not listed alphabetically, they are ordered on the basis of economic size.
• Minor discrepancies between sums of constituent figures and totals shown reflect rounding.
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