Though 2017 has been a tumultuous year marked by natural disasters, geopolitical tensions, and deep political divisions in many countries, the year is seen ending on a high note, according to the International Monetary Fund (IMF) in a blog publication seen by businessamlive.com.
The IMF Blog published Monday and entitled “The Year in Review: Global Economy in 5 Charts”, indicated that the year would end on a high note since GDP accelerated over much of the world in the broadest cyclical upswing since the start of the decade, warning that policymakers should not fall into complacency but instead seize the opportunity for reforms.
“One notable aspect of last year’s upswing is its breadth. Growth accelerated in about three-quarters of countries—the highest share since 2010. Even more important, some of the countries that had high unemployment for some time, for example, several in the euro area, are participating in the growth surge and experiencing strong employment growth,” the blog said.
It specifically noted that some of the larger emerging market economies, such as Argentina, Brazil, and Russia, exited their recessions despite growth in per capita terms, in almost half of emerging market and developing economies—especially the smaller ones—lagging behind advanced economies.
“Countries that struggled included fuel exporters and low-income economies suffering from civil strife or natural disasters.”
The IMF said that global trade growth, boosted by a recovery in investment, rebounded from its slowest pace since 2001, other than during the recession of 2009, adding that global trade grew faster than GDP in 2017.
The Bretton Woods institution noted that metal and fuel prices were supported by stronger momentum in global demand as well as supply restraints in the energy sector, including hurricane-related stoppages in the United States, financial disruptions in Venezuela, and security problems in regions of Iraq.
“With futures prices indicating general stability or some moderation in prices going forward, commodity exporters need to continue their adjustment to lower revenues while diversifying their economies’ production and export mixes to build resilience and support future growth,” it said.
According to the IMF, equity valuations continued their ascent in 2017 and are near record highs, as central banks have maintained accommodative monetary policy settings amid weak inflation.
“This is part of a broader trend across global financial markets, where low interest rates, an improved economic outlook, and increased risk appetite boosted asset prices and suppressed volatility (as measured by the VIX, an index of volatility). While easier financial conditions bolstered growth momentum, they also pose risks if the search for yield extends too far,” it stated.
It however said wage growth has remained puzzlingly tepid in advanced economies despite falling unemployment rates. Continued slack in labor markets—in the form of still high unemployment in some countries or high levels of involuntary part time unemployment—along with weak productivity growth explain much of the sluggishness.
To this end, it warned that economic participants should not let a good recovery go to waste.
“Reveries of an economic sweet spot should not lull policymakers or markets into complacency. Good times are most likely temporary. To ensure a more durable recovery, policymakers must seize the opportunity for reform,” it said.
Frontpage November 13, 2019