Challenges to Global Economy : World Economic Situation and Prospects 2019

The World Economic Situation and Prospects 2019 discusses various challenges before the global economy. The important of them are:

Trade Tensions

The global trade growth moderated at 3.8 per cent in 2018 against the growth rate of 5.3 per cent in 2017. The stimulus measures and direct subsidies have offset much of the direct economic impacts on China and the United States.
But if these trade tensions continue for a prolonged period of time it may severely disrupt the global economy. The spillover effects of this trade tensions would spread through global value chains, particularly in East Asia.

Tightening fiscal conditions

Tightening fiscal conditions would result in a rapid rise in interest rates. On the other hand, the strengthening of the US dollar could exacerbate emerging market fragilities, leading to a heightened risk of debt distress.
These risks can be further aggravated by global trade tensions, monetary policy adjustment in developed economies, commodity price shocks, or domestic political or economic disruptions.
The countries with a substantial amount of dollar-denominated debt, high current account or fiscal deficits, large external financing needs and limited policy buffers are more vulnerable to stress due to tightening fiscal conditions.

Climate risks

The climate change risks necessitate a fundamental shift in the way the world powers economic strategies. Integrating the economic decision making with negative climate risks associated with emissions would be imperative.
The tools for achieving the integration would be carbon pricing measures, energy efficiency regulations such as minimum performance standards and building codes, and reduction of socially inefficient fossil fuel subsidy regimes.

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