International Monetary Fund To Release Economic Outlook NPR's Noel King talks to David Wessel of the Brookings Institution about finance ministers and central bankers arriving in Washington, D.C., for meetings amid gloomy forecasts for the world economy.
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International Monetary Fund To Release Economic Outlook

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International Monetary Fund To Release Economic Outlook

International Monetary Fund To Release Economic Outlook

International Monetary Fund To Release Economic Outlook

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NPR's Noel King talks to David Wessel of the Brookings Institution about finance ministers and central bankers arriving in Washington, D.C., for meetings amid gloomy forecasts for the world economy.

NOEL KING, HOST:

Finance ministers and central bankers from all over the world are getting together in Washington this week for the annual meetings of the International Monetary Fund and the World Bank. They will be talking about an economic forecast that is not looking great. Global economic growth this year is expected to be the slowest it's been since the financial crisis 10 years ago. David Wessel of the Brookings Institution is on the line. Good morning, David.

DAVID WESSEL, BYLINE: Good morning, Noel.

KING: So what goes on at the IMF and World Bank meetings?

WESSEL: Well, there are a lot of formalities. There are a lot of speeches. There are a lot of meetings. But we have a lot of people here - 189 members of the IMF send their central bankers and finance ministers to Washington. So what's really important is they meet informally with each other to compare notes, share frustrations and try to figure out how to resolve both the short-term and long-term problems that plague the world economy.

KING: And they will be talking about the economic forecast, which shows that growth is slowing - is slow. What do we know about how big a problem this is?

WESSEL: Well, here's how Kristalina Georgieva, the new managing director of the IMF, put it as she previewed the semi-annual IMF World Economic Outlook.

(SOUNDBITE OF ARCHIVED RECORDING)

KRISTALINA GEORGIEVA: Two years ago, the global economy was in synchronized upswing. Measured by GDP, nearly 75% of the world was accelerating. Today, even more of the world economy is moving in sync. But unfortunately, this time growth is decelerating. To be precise, in 2019 we expect slower growth in nearly 90% of the world.

WESSEL: So the U.S. economy, it's still doing better than other big economies around the world. But it's part of that slowdown. Manufacturing is down. Business investment is weak. Surveys of business executives find them in a funk, partly because of President Trump's trade war. The bond market is pessimistic. The Federal Reserve seems worried enough to be expected to cut interest rates one more time at the end of this month.

On the other hand, the job market is still strong, and that's lifting consumer sentiment and business spending. The stock market is upbeat. It's hard for me to believe this situation can persist, but it's also hard to know whether the good news will prevail over the bad or vice versa.

KING: You and I have a deal where I don't ask you to make predictions, and I'm going to stick to it. But at a certain point, we will know whether this is the beginning of a recession or whether it's just a slowdown. When will we get a sense of that?

WESSEL: Exactly. We're at an inflection point. The U.S. and the world economies are slowing, but whether this is a prelude to a recession depends a lot - in fact, more than usual - on what politicians and policymakers do.

I think the last few days have brought us some rays of hope. There's talk of a truce in the U.S.-China trade war. Now, there may not be a lot of substance to the so-called mini-deal struck between the Chinese and the U.S. But if it materializes, it's a step away from a confrontation, and that should lift business spirits, maybe dispel some uncertainty. Maybe Boris Johnson in the U.K. can cut a deal to avoid a messy Brexit. And there are even stories in Germany that the - that they might increase government spending, both to fight a climate change and to fight a recession.

I don't think any of these are sure things, and I'm not overly optimistic. But what politicians do in the next couple of months could determine whether the slowdown degrades into a recession or not.

KING: And in particular, it sounds like what you're saying, what politicians outside of this country do.

WESSEL: Exactly. There's a lot that happens inside the U.S. that influences our economy - the Fed, will the GM strike be settled and stuff? But you know, a lot does depend on what happens outside the United States. Will China arrest its slowdown? Will European governments open the fiscal spigots? Will our trading partners raise tariffs and ratchet up the trade war or come to terms with President Trump and avoid that? It's - sorry, but I got more questions than answers today, Noel.

KING: (Laughter) As usual. David Wessel, director of the Hutchins Center at Brookings, thanks so much.

WESSEL: You're welcome.

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