For the past two years, global growth outcomes and prospects have steadily deteriorated, amidst persistent policy uncertainty and weak trade and investment flows. We now estimate global GDP growth to have been 2.9% this year and project it to remain around 3% for 2020-21, down from the 3.5% rate projected a year ago and the weakest since the global financial crisis. Short-term country prospects vary with the importance of trade for each economy though. GDP growth in the United States is expected to slow to 2% by 2021, while growth in Japan and the euro area is expected to be around 0.7 and 1.2% respectively. China’s growth will continue to edge down, to around 5.5% by 2021. Other emerging‑market economies are expected to recover only modestly, amidst imbalances in many of them. Overall, growth rates are below potential.

The global outlook is fragile, with increasing signs that the cyclical downturn is becoming entrenched. GDP growth remains weak, with a slowdown in almost all economies this year, and global trade is stagnating. A continued deepening of trade policy tensions since May is taking an increasing toll on confidence and investment, further raising policy uncertainty. Supportive labour market conditions continue to hold up household incomes and consumer spending, at least in the near term, although survey measures point to weakness ahead. Moves towards a more accommodative monetary policy stance in many economies are keeping asset prices high, though the benefits for real activity appear to be less powerful than in the past. In many countries fiscal easing remains limited, with scope to take further advantage of low interest rates to support growth. Overall, given the balance of these forces acting, global GDP growth is projected to remain at around 3% in 2020 and 2021, after having declined to 2.9% this year, the weakest pace since the financial crisis (Table 1.1). Inflation is expected to remain mild. Global trade growth is projected to pick up only slowly given continued trade tensions, with trade intensity over 2019‑21 remaining low. These developments raise concerns that growth expectations continue to decline in the absence of policy action. The induced reallocation of activities across countries and adjustment to supply chains that results from persisting trade tensions is both a drag on demand and a source of weaker medium-term growth by reducing productivity and incentives to invest.