What Is World Economic Outlook (WEO)?

The World Economic Outlook (WEO) is a report by the International Monetary Fund that analyzes key parts of the IMF's surveillance of economic developments and policies in its member countries. It also projects developments in the global financial markets and economic systems.

The WEO is usually prepared twice a year and is used in meetings of the International Monetary and Financial Committee.

Key Takeaways

  • The World Economic Outlook (WEO) is an IMF report that provides analysis and forecasts of economic developments and policies in its member countries.
  • The report encapsulates state of the global economy and highlights risks and uncertainty that threaten growth.

Understanding World Economic Outlook (WEO)

The World Economic Outlook (WEO) presents the IMF's analysis and projections of global economic developments and classifies their analysis by region and stage of economic development. This report is the main instrument of disseminating the findings and analysis of their global surveillance activities to the world.

Recent News and Trends in WEO

In January 2018, the WEO reported that global economic activity continued to "firm up" at the end of 2017. They estimated global output to have grown by 3.7 percent in 2017, higher and faster than predicted.

The WEO suggested U.S. tax policy changes would stimulate global activity, including the short-term impact of U.S. investors responding to corporate income-tax cuts, and favorable demand spillovers for U.S. trading partners, particularly its direct neighbors, Canada and Mexico. They estimate the effect on U.S. growth to be positive through 2020.

Economic Changes

The WEO also reported that global recovery has strengthened, with some 120 economies, accounting for three quarters of world GDP, seeing a pickup in growth in 2017, the broadest synchronized global growth upsurge since 2010. Growth in the third quarter of 2017 was higher than projected for advanced economies, including Germany, Japan, Korea, and the United States. Furthermore, key emerging market and developing economies, including Brazil, China, and South Africa, also posted third-quarter growth stronger than their prior forecasts.

By April 2019, the situation had reversed. Global economic growth slowed during the second half of 2018. For 2019, growth was expected to be down by three basis points, from 3.6 percent in 2018 to 3.3 percent in 2019. But it will pick up pace again in 2020.

According to the agency, the main causes for a global deceleration were trade tensions between the United States and China during the second half of 2018, tightening of financial policies across several countries, and policy uncertainty across economies. Industrial production declined noticeably, especially in China, during the second half of 2018 due to declining business confidence.

Positive Economic Predictions

The IMF is sanguine about growth during the second half of 2019 as central banks in developed economies, such as the United States and UK, shift to a more accommodative stance and a trade agreement begins to take shape between the United States and China. The loosening of trade deadlocks and economic policies in developed economies during the second half of 2019 will spur growth in emerging markets.

The IMF predicts growth in emerging markets will increase from 4.4 percent in 2019 to 4.8 percent in 2020. The economies of Argentina and Turkey will play a pivotal role in that growth and derailments in any or both countries will affect the final figure.

Key risks to the forecasts include the flaring up of trade tensions between countries, risks regarding the UK's exit from the Eurozone area, and decelerating growth in Europe and China. The agency termed the current state of global economy as a "delicate moment" and highlighted the role of policy certainty in ensuring that growth remains on track and the risks remain minimal.