According to the International Monetary Fund’s (IMF) latest World Economic Outlook (WEO) entitled “Too Slow for Too Long”, global growth is projected at 3.2% in 2016, in line with that of last year, but 0.2 percentage points lower than January’s edition of the WEO.
The downward revision is the result of increasing financial turbulence, slower economic activity in advanced economies and severe macroeconomic conditions in in Brazil, Russia and some other commodity exporters.
Looking ahead to 2017 and onwards, advanced economies are expected to have a modest growth as well as a weakened potential growth. A stronger recovery in advanced economies is being hindered by “unfavorable demographic trends, low productivity growth and legacies from the global financial crisis”.
Therefore, the IMF expects global economic growth to recover to 3.5% in 2017 but that will be driven by emerging markets and developing economies.
It is important to note that the 2017 projected recovery relies on several crucial assumptions for the IMF:
The IMF recommends that advanced economies seek structural reforms, continued monetary policy accommodation but also fiscal policies, where fiscal space allows. In fact, it is widely approved amongst economists that monetary policies relying on negative interest rates cannot be sustainable in the long run since there’s a limit to how negative interest rates can be without leading to cash hoarding. Therefore, fiscal policies must also be implemented to boost growth.
As for Lebanon’s growth projections, they are not far from the global economic gloom. Real GDP growth was revised downwards to 1% in 2015 and 2016 compared to 2% and 2.5% projected back in July 2015’s Article Four Consultations.
Key Growth Rates for the Global Economy
Year on Year Growth Rates | 2014 | 2015 | 2016p | 2017p |
World Output | 3.4 | 3.1 | 3.2 | 3.5 |
Advanced Economies | 1.8 | 1.9 | 1.9 | 2 |
Emerging Market and Developing Economies | 4.6 | 4 | 4.1 | 4.6 |
World Trade Volume (goods and services) | 3.5 | 2.8 | 3.1 | 3.8 |
Oil Prices (US Dollars) | -7.5 | -47.2 | ||
Consumer Prices in: | ||||
Advanced Economies | 1.4 | 0.3 | 0.7 | 1.5 |
Emerging Market and Developing Economies | 4.7 | 4.7 | 4.5 | 4.2 |
Source: IMF