World Economic Outlook: Navigating global challenges with preparedness

Editor's note: Matteo Giovannini, a special commentator for CGTN, is a finance professional at the Industrial and Commercial Bank of China and a member of the Global Young Leaders Dialogue. The article reflects the author's views, and not necessarily those of CGTN.

At a time of ongoing geopolitical tensions, such as trade disputes, regional conflicts, and political instability, the opportunity for decision makers to sit at the same table to discuss common solutions that can influence the trajectory of global issues, preventing uncertainty and facilitating business confidence, is widely considered as something of great significance.

From April 15 to 19, central bankers, ministers of finance and development, private sector executives, representatives from civil society and academia gathered in Washington D.C. to attend the Spring Meetings of the Boards of Governors of the International Monetary Fund (IMF) and the World Bank Group.

These periodic meetings are important because they facilitate global economic cooperation, provide a platform for policy coordination, address development challenges and promote financial stability and sustainability on a global scale. The outcomes of these assemblies are important as they can influence economic policies and priorities across countries and regions.

On April 16, the semi-annual World Economic Outlook report, which consists of a series of macroeconomic data and projections of economic developments at group and individual countries' level, was officially released to the public.

The global economy is headed for another year of slow but steady growth, the IMF said, with a forecast of global real GDP growth of 3.2 percent for 2024 and 2025 in line with the rate registered in 2023. Taking into account economic growth in the United States and some emerging markets, the IMF raised its growth forecast for this year, but warned that the outlook should still be cautious because of persistent inflation, economic divergence among countries, and increasing geopolitical risks.

The IMF left unchanged its forecast for China's growth of 4.6 percent in 2024 and of 4.1 percent for 2025. The report underlined the need for China to introduce a restructuring package for the property sector that includes the exit of non-viable developers and the completion of unfinished housing projects, while providing support for households to restore consumer demand.

The IMF also acknowledged that China's year-on-year GDP growth in the first quarter well exceeded market expectations, debunking the recurring "Peak China" theory and leading to a possible upward revision of growth prospects of the world's second-largest economy for the foreseeable future.

While data presented by the IMF demonstrate that emerging markets and developing economies will be major contributors of the world output, with Asia leading the way thanks to India and China, several factors could hinder medium-term growth and are the reasons for the current pessimism about the global economy.

Ongoing geopolitical tensions, trade disputes, and protectionist policies are set to create uncertainty and disrupt global supply chains, affecting business confidence and investment decisions. In addition, many countries have to deal with high levels of public and private debt, which can constrain growth prospects and financial stability.

Moreover, some economies face structural challenges such as aging populations, low productivity growth, and inadequate infrastructure, which can weigh on long-term growth potential. Furthermore, rising income inequality and social tensions in some countries can undermine economic stability and growth prospects, as well as contribute to the rise of populist movements that can lead to political unrest.

Considering all these challenges and in order to turn the tide and foster stronger global economic growth, those who have decision-making power must consider incorporating several actions as a crucial part of their strategic planning process.

Decision makers should introduce an effective policy coordination prioritizing synchronized efforts to address global economic challenges, including trade disputes and supply-chain frictions. In this sense, monetary policy coordination should be implemented by major central banks through a mechanism that allows for effective communication and coordination of policy instruments to support price stability and economic growth.

Countries should also implement trade and structural reforms needed to promote economic growth, enhance competitiveness and foster sustainable economic development. In particular, trade reforms are necessary to solve disputes and promote an open, rules-based ecosystem that boosts global trade volumes, while structural reforms enhance labor market flexibility, improve education and streamline regulations.

Further, investments must be addressed towards technological innovation with the goal of creating infrastructure that can boost the level of productivity and stimulate widespread growth. In this context, countries should focus on improving digital infrastructure, on investing in human capital and on coordinating on widely accepted rules.

Lastly, countries should have a clear roadmap that prioritizes the achievement of sustainable development goals. Investing in renewable energy technologies and promoting sustainable energy policies can not only solve pressing global challenges, such as climate change and income inequality, but also lead to a more resilient, equitable and prosperous economy in the long run.

Overall, a combination of prudent policies that address both short-term challenges and long-term structural issues represents the perfect recipe for any decision maker to navigate the uncharted waters of the current economic environment and ensure sustained global economic growth.

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