2019/20 Budget Communication Final Budget Communication | Page 27

economies, have supported a significant slowdown in the pace of the global recovery in the second
half of 2018, with prospects for the near term signaling a further weakening in the first half of
2019. However, global growth is expected to rebound in the latter half of this year and into 2020,
due mostly to improved momentum in emerging markets and developing economies, as some
economies currently experiencing macroeconomic distress are poised to recover. Still, the gradual
slowdown in advanced economies is anticipated to counteract this development, supporting a
plateau in global growth for the medium term.
According to the IMF’s latest World Economic Outlook of April 2019, the growth of
world output narrowed by 20 basis points in 2018 to 3.6 percent, registering 30 basis points lower
than its projected outcome. Underpinning this development, real GDP growth in advanced
economies tapered by 20 basis points to 2.2 percent, as a weakening in external demand triggered
a sizeable decrease in output growth in Japan. Similarly, real growth in the euro area contracted
by 60 basis points to 1.8 percent, while output in the United Kingdom declined by 40 basis points
to 1.4 percent—marking the lowest pace of growth in six years.
In contrast, real growth in the United States firmed by 70 basis points to 2.9 percent
over the year, supported by positive contributions from Personal Consumption Expenditure (PCE),
exports, nonresidential fixed investment, and higher federal government spending. Output in
emerging markets and developing economies fell by 30 basis points to 4.5 percent, as growth in
China weakened by 20 basis points to 6.6 percent in 2018—the slowest its economy has expanded
in 28 years—amid trade tensions with the U.S.
When compared to the global outlook presented in the 2018/19 Budget
Communication, global growth for 2019 has been revised downward by 60 basis points to 3.3
percent, with projections for 2020 now 30 basis points lower at 3.6 percent. Following a strong
performance in 2017 and the first half of 2018, a myriad of factors, including a decline in
investment in Italy, slowing car production in Germany and natural disasters in Japan, all
underscored the weakening sentiment for growth forecasts. The pace of economic growth in
advanced economies is also now projected to slow by 30 basis points to 1.8 percent in 2019, and
by 50 basis points to 1.7 percent in 2020; while emerging economies are now anticipated to
strengthen by 4.4 percent and 4.8 percent in 2019 and 2020, respectively, as compared to 4.9
percent and 5.1 percent one year ago.
26