Reconciling the IMF's 3 Growth Messages

Three important messages for the global economy emerged from the latest “World Economic Outlook” released by the International Monetary Fund this week: The baseline for economic growth is essentially the same over the medium term, with slightly better shorter-term prospects; the risks are getting bigger and are tilted to the downside; and better national policy making and improved cross-border coordination can lift prospects.

These messages could well play out this year. It is unlikely, however, that all three will hold true all the way until 2022, the period covered by some of the WEO forecasts. Instead, the underlying tensions and contradictions associated with protracted low and insufficiently inclusive growth will likely make the macroeconomic situation a lot less stable, thereby materially increasing the likelihood of a tip. The exact nature of this eventual shift, whether to an outcome that is much better or much worse, will depend in large part on whether governments follow up on many of the IMF’s recommendations.