State of the Global Economy: By Lambert Mbom.

Washington D.C. – The Spring session of the IMF/World Bank sprung into action on Tuesday with the release of the World Economic Outlook (WEO), the flagship publication of the IMF, that analyzes key parts of the Global economy revealing that “Global growth softened to 3.6 percent in 2018 and is projected to further slow to 3.3 percent in 2019.”

The major headline of the 2019 edition is the projection of a slowdown in growth in 2019 for 70 percent of the global economy and a precarious recovery.

“The escalation of US-China trade tensions, needed credit tightening in China, macroeconomic stress in Argentina and Turkey, disruptions in the auto sector in Germany, and financial tightening, alongside the normalization of monetary policy in the larger advanced economies, have all contributed significantly to a weakened global expansion, especially in the second half of 2018,” said Gita Gopinath Economic Counsellor and the head of the IMF’s research.

To deal with these, the IMF is recommending to policy makers across all economies, “to take actions that boost potential output, improve inclusiveness, and strengthen resilience. There is need for greater multilateral cooperation to resolve trade conflicts, to address climate change and risks from cybersecurity, and to improve the effectiveness of international taxation.”

Prior to Tuesday’s release the IMF had advanced release of three other chapters of the WEO addressing some of the foregoing policy recommendations especially on trade.

Chapter Two focused on the dangers of rising corporate power which according to authors “has had a fairly limited negative economic impact so far. But if left unchecked, it could take a bigger toll on growth and people’s incomes in the future”

Chapters Three and Four focused on the white elephant in the global economy: trade with chapter three noting that “trade tensions and sluggish productivity growth could slow the decline in the relative price of machinery and equipment which could hold back investment growth worldwide. Yet another argument to lower trade barriers.

Chapter Four notes that economic forces not tariffs drive changes in trade balances.

In her remarks during the Press conference for the release of the WEO, it became clear that African economies are more patients than major actors. In response to a question on how the trade wars are going to affect Sub-Saharan Africa in 2019, the new Chief Economist of the IMF explained that while there is an impact that comes from trade wars, “it also impacts global growth which then spills over into oil crisis. For instance, for Nigeria the important price that matters is what is happening to commodity prices.”

“For countries more reliant on commodities and, again, those are predominantly in the emerging world, weaker global growth and particularly weaker demand from China could be associated with lower commodity prices, which could put additional stress on current accounts, on public finances of many emerging economies,” Gian Maria Milesi-Ferreti, Deputy Director of the IMF’s Research Department.

This seems to confirm the fact that when US, China, Europe sneeze, Africa catches a cold.

An interesting feature of the publication is its statistical appendix which provides “assumptions, What’s New, Data and Conventions, Country Notes, Classification of Countries, Key Data Documentation, and Statistical Tables.”

In its Table A4 that delineates the annual percentage change in Real GDP of Emerging Markets and Developing Economies, Sub Saharan African countries in 2018 had an average of 3.0 but the following countries Rwanda (8.6), Ethiopia (7.7), Cote D’Ivoire (7.4), the Gambia (6.6), Tanzania (6.6), Benin (6.5), Uganda (6.2), Kenya (6.0), Burkina Faso (6.0) and Guinea (5.8) leading the pack.

The following countries Equatorial Guinea (-5.7), South Sudan (-1.2), Namibia (-0.1), Angola (-1.7), South Africa (0.8), Eswatini (0.2), Lesotho (1.5), Liberia (1.2), Nigeria (1.9) and Gabon (1.2)

While the numbers are projected to hover around the same rate in 2019, Ghana is projected to have the best projections in 2019 with a jump from 5.6 to 8.8, South Sudan from (-1.2) to (8.8). The Republic of Congo whose economy was a scandalous (0.8) is expected to rebound to (5.4) while Zimbabwe is expected to decline to (-5.2).

Ethiopia and Cote D’Ivoire continue to be the shining spots of African economy while Rwanda will see a dent in its numbers.

According to A12 with a snapshot of Balance on Current accounts five African countries distinguish themselves  with the worst current account balance include Mozambique (-34.4), Liberia (-23.3), Seychelles (-16.3) and Guinea (-16.1) and Niger (-16.3) and only six others trending in positive territory namely Eswatini (9.9), Botswana (9.6), Republic of Congo (5.5), Niger (2.1), Angola (1.3) and Madagascar (0.3).

“This is a delicate moment for the global economy. If the downside risks do not materialize and the policy support put in place is effective, global growth should rebound. If, however, any of the major risks materialize, then expected recoveries in stressed economies, in high debt economies, in export dependent economies, may be derailed. In that case, policymakers will need to adjust,” Gita Gopinath concluded.