WORLD ECONOMIC OUTLOOK : POLICY PIVOT AND RISING THREATS .

 International Monetary Fund's October 2024 World Economic Outlook released focused on divergent,interesting and disturbing tendencies facing the global economy. Most resilient aspect has been  that the global war against inflation had almost won because after peaking at 9.4% per year in the third quarter of 2022 global headline inflation rate is currently projected to reach 3.5% by the end of 2025 below the average of 3.6% recorded between 2000 and 2019.It has been observed that in economies where core inflation persist at above target levels policy rules should remain in restrictive territory.Much of the disinflation can  be attributed to the unveiling of the shocks themselves followed by improvement in labour supply often linked to immigration . Immigration to European union, labour market was higher during 2022-23 was substantially higher tha in the past. Although major decline in inflation is a significant achievement downside risks are also increasing, and  dominate the world outlook as the escalation in regional conflicts continues. Monetary policy remained tight for too long which led  to a possible resurgence of financial markets and voltatility with adverse effects.However monetary policy played a vibrant and greater role by helping to keep inflation expectations anchored. Inflation invariably returned to near central banks' target levels. 

As the  battle against inflation is almost won, a   triple policy pivot is currently required to tackle issues 1. Monetary policy .Since June major Central Banks of advanced economies have started to cut their policy rates, moving  their policy stance towards neutral to  labour markets which are showing signs of weakness with rising unemployment rates. The change in global monetary conditions is easing the pressure on emerging market economies with their currencies against US dollar and financial conditions improving. Present day world is further dominated by supply chain disruptions and   largely from climate, health and geopolitics.2.Second pivot is fiscal policy. Fiscal space is also the corner stone of financial stability. It is observed that after years of lose fiscal policy; it is now  the time for debt to stabilise debt dynamics and rebuild much needed fiscal buffers,.In many countries primary balances or the difference between public revenue and public expenditure net of debt service is increasing. 3.The third pivot which is really difficult is that to achieve structural reforms. Nature of Structural reforms may vary depending upon the prevailing conditions in individual countries and reforms are bound to affect welfare measures and living conditions of the poor and marginalised. 

While 41 member  advanced economies account for 40.7  % world output based on purchasing power parity estimate, 155 emerging market and developing economies account for 59.3% of global output. Among individual countries USA account for 15%, China 18.7% and India 7.9% of  global GDP as per estimates based on purchasing parity .On the otherhand exports of goods and services are concerned the share of  advanced economies were 61.8 % followed by ,EMDES 38.2%,Euro Area specifically 26.3% and individual countries- China 11.3 % USA 9.9% and India 2.5% respectively. Growth of world output shows that India continues to be the epic center of GDP growth with 8.2% in 2023 projected to grow 7.0% in 2024 and 6.5 % in 2025.On the other hand recorded 5.2% in 2023 further projected to grow 4.8% in 2024 and 4.2% in 2025.As against Advanced Economies 1.7% in 2023 and projected 1.8% in 2024 and 1.8 % in 2025,USA  did better with 2.9% in 2023 ,2.8% in 2024 and 2.2% in 2025.While Japan got 1.7% growth in 2023 further projected 0.3% in 2024 and 1.1 % in 2025,as against 1.1% estimated for the entire period for France and 0.3%,1.1 and 1.5 for UK for the corresponding years respectively. It is observed that while the world output witnessed 3.3%growth in 2023 and projected to grow 3.2% in 2024 and 3.2% in 2025,the growth of Emerging markets and developing economies were remarkably stable indicating 4.4 % in 2023 projected for 4.2% for 2024 and 4.2% in 2025.

Assessment of global economic outlook shows that medium term growth and rising debt trajectories increase the risk, especially in a low growth high debt environment. Deficits are expected to reach more than $ 100 trillion in 2024, after a decline in 2021-22.In 2030 global public debt is edged to reach 100% of global GDP wherein US and China will be contributing major share. Sovereign debt in many countries increased substantially above pre pandemic level. According to IMF fiscal adjustments should primarily focus on credibly rebuilding buffers to keep financing costs reasonable, anchor medium term inflation expectations and contain risks of downward ratings of  sovereigns.While the decline in policy rates provided some fiscal relief by lowering funding this will not be sufficient particularly when long term real interest are much above pre pandemic levels. Even for major economies like USA and China debt dynamics are not stabilised under current fiscal  plans.

IMF's Structural Adjustment Programs refers to a  set of economic reform measures that a country must adhere to inorder to secure loans from IMF. Such policies consist of  reducing Government expenditure,liberalising foreign trade , investment,exchange rate, privatisation etc.According to IMF Structural Adjustment reform much needs to be done to improve growth prospects and lift productivity up, by countries rebuilding fiscal buffers to address multiple challenges like ageing and declining population in many parts of the world.On the contrary young and growing population in Africa is searching for more opportunities.Challenges further include tackling climate change, increasing resilience and improving the living conditions of the most vulnerable sections within and across countries. Unfortunately the medium level global growth prospects remain only at 3.1% which is not sufficient to meet the challenges. Many countries are witnessing both external competition and Structural weaknesses in manufacturing and productivity. Many countries are implementing industrial and trade policy measures to protect their workers and industries. According to IMF while protective measures can sometimes boost investment in the short run,on the otherhand since they depend on debt and financial subsidies from the Government,often they may fail to improve the standard of living of the people. In any case imposing restrictions on Government expenditure and following austerity policies by  already poorer nations are bound to affect welfare measures heavily on the poor, women, children and other vulnerable groups.Already we have witnessed how countries like Srilanka and Pakistan suffered recently. In fact IMF has to give appropriate attention and care to the sufferings of the poor marginalised and distressed social groups of any country that is subject to stringent conditionalities,so as to achieve multiple objectives of global monetary cooperation, growth, financial stability, trade,exchange rate stability, employment and better global payment system. The proposed new global financial architecture comprising of  public financial institutions like IMF World Bank ADB,financial standard setters, monetary arrangement etc should be effective in developing global financial architecture that address issues comprising, debt,development lending, multilateral development banks, global tax norm and climate finance etc.