World Economic Situation and Prospects as of mid-2019 United Nations New Y ork, 2019World Economic Situation and Prospects as of mid-2019 *The global growth outlook has weakened amid unresolved trade tensions and elevated international policy uncertainty. Across both developed and developing countries, growth projections for 2019 have been downgraded. Alongside a slow- down in international trade, business sentiments have deteriorated, casting a cloud on investment prospects. In response to softening economic activity and subdued inflationary pressures, major central banks have eased their monetary policy stances.While part of the growth slowdown reflects temporary factors, downside risks remain high. Prolonged trade disputes could have significant spillovers, includ- ing through weaker investment and the disruption of production networks. Recent monetary policy shifts have reduced short-term financial pressures, but may further fuel debt accumulation, increasing medium-term risks to financial stability. These persistent macroeconomic risks are compounded by greater frequency and inten- sity of natural disasters, reflecting the rising effects of climate change.In the face of these multifaceted challenges, tackling the current growth slowdown and placing the world economy on a robust path towards the 2030 Agenda for Sustainable Development require more comprehensive and well- targeted policy responses. This should include a combination of monetary, fiscal and development-oriented measures. A coordinated, multilateral approach to global cli- mate policy, including a price on carbon, is an important element of this policy mix. Increasing use of internal CO 2prices by the private sector indicates some willingness by firms to adapt to expected policy changes. The deterioration in growth prospects of many countries that are already lagging behind poses additional challenges for sustainable development, especially the goal to universally eradicate poverty by 2030. Future progress on poverty reduction will, to a significant extent, depend on the effective management of ongoing urbanization, particularly in Africa and South Asia. Summary * The present document updates World Economic Situation and Prospects 2019 (United Nations publication, Sales No. E.19.II.C.1), released in January 2019. iContents Summary . i I. Global macroeconomic trends . 1 A. Global overview . 1 Short-term outlook for the global economy has weakened . 1 Slowdown in world trade activity weighing on global growth . 4 Volatility in global commodity prices persists . 4 External headwinds to growth compounded by domestic factors . 5 Renewed weakness in investment may dampen medium-term outlook . 6 Growth prospects of LDCs have weakened . 6 B. Macroeconomic policies and financial markets . 7 Monetary policy stances are shifting . 7 Financial market conditions have eased, but stability risks remain . 8 Fiscal policy space is constrained in many countries . 8 C. Risks to the outlook . 9 Further trade restrictions would hamper global growth . 9 High indebtedness is a key source of vulnerability . 10 Climate risks pose an ever-increasing threat to the global economy . 10 Rising number of refugees creates macroeconomic challenges . 11 II. Medium-term sustainable development challenges . 11 A. Internalising the cost of GHG emissions . 11 Carbon pricing is a key element in addressing climate change . 11 Emissions trading systems and carbon taxes are the most common initiatives . 12 Many companies already use internal carbon pricing . 13 Carbon pricing would redefine the notion of economic wealth and liabilities . 14 Carbon leakage highlights the need for a multilateral approach . 14 B. Poverty trends, urban-rural divide and sustainable urbanization . 14 Worsening macroeconomic outlook dims prospects for poverty eradication . 14 Rural-urban poverty gaps are slowly narrowing . 16 Sustainable urbanization is vital for future poverty reduction . 17 III. Economic outlook by regions . 18 A. Developed economies . 18 B. Economies in transition . 20 C. Developing countries . 20 Africa . 20 Asia . 21 Latin America and the Caribbean . 23 iiiTable I Growth of world output, 20172020 . 3 Figures I GDP growth forecasts and revisions for 2019 . 2 II Average annual GDP per capita growth by region . 4 III Contribution to global merchandise import volume growth by region . 5 IV Annual growth of gross fixed capital formation in selected emerging economies . 6 V Productivity trends in selected emerging economies . 7 VI Monetary policy shifts . 8 VII Developing regions exports to selected major economies . 10 VIII Carbon prices, 2019 . 13 IX Geographic composition of poverty increase between 2014 and 2018 . 15 X Rural and urban poverty headcount at national poverty lines, 20122014 average . 16 XI Extreme poverty headcount rates and projected changes in urbanization (latest available data) . 17 XII Projected real GDP growth in Africa in 2019, by subregion . 21 XIII Global semiconductor billings vs. East Asias exports . 23I. Global macroeconomic trends A. Global overview Short-term outlook for the global economy has weakened The global economy is experiencing a broad-based growth slowdown, reinforcing projec- tions in the World Economic Situation and Prospects (WESP) 2019 that the current growth cycle has peaked. In tandem with slowing industrial production, international trade activ- ity has visibly weakened, reflecting in part unresolved trade disputes between the United States of America and China. Economic sentiment and business confidence indicators have also deteriorated, amid persistently high uncertainty in the international policy environment. In many developed and developing countries, the moderation in gross do- mestic product (GDP) growth has been more pronounced than expected, as some risks to economic activity materialized. Slowing economic activity and low inflationary pressures have prompted shifts in the monetary policy stances of major central banks. While looser monetary conditions have contributed to some stabilization in global financial markets and capital flows, the world economy continues to face considerable downside risks aris- ing from persistent trade tensions, the build-up of financial imbalances, and intensifying climate change. Against this backdrop, world gross product growth is now expected to moderate from 3.0 per cent in 2018 to 2.7 per cent in 2019 and 2.9 per cent in 2020, reflecting a downward revision from WESP 2019 forecasts released in January (see figure I and table I). Amid elevated downside risks, many countries today have limited macroeco- nomic policy space to mitigate the effects of an adverse shock. The increasingly chal - lenging economic environment is casting a shadow over the prospects for achieving the sustainable development goals (SDGs). GDP per capita growth is expected to remain weak in large parts of Africa, Western Asia, and Latin America and the Caribbean, complicating poverty reduction efforts in these regions (see figure II). In addition, many developing countries continue to face increasing risks from climate change, threatening their eco- nomic prospects. These challenges highlight the urgent need to strengthen multilateralism and address existing gaps in development financing. 131 Financing for Sustainable Development Report 2019 (United Nations publication, Sales No. E.19.I.7).2 World Economic Situation and Prospects as of mid-2019 Figure I GDP growth forecasts and revisions for 2019 2, 33, 4 A. GDP growth forecasts for 2019 2 The designations employed and the presentation of material on these maps do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. Dotted line represents approximately the Line of Control in Jammu and Kashmir agreed upon by India and Pakistan. The final status of Jammu and Kashmir has not yet been agreed upon by the parties. Final boundary between the Republic of Sudan and the Republic of South Sudan has not yet been determined. A dispute exists between the Governments of Argentina and the United Kingdom of Great Britain and Northern Ireland concerning sovereignty over the Falkland Islands (Malvinas). 3 The maps represent countries and/or territories or parts thereof for which data is available and/or analysed in World Economic Situation and Prospects 2019. The shaded areas therefore do not necessarily overlap entirely with the delimitation of their frontiers or boundaries. B. Revisions to GDP growth forecasts for 2019 compared to WESP 2019 Source: UN/DESA. Note: *Less than ±0.2 percentage points.3 World Economic Situation and Prospects as of mid-2019 Table I Growth of world output, 20172020 Annual percentage change Change from WESP 2019 January forecast 2017 2018 a 2019 b 2020 b 2019 2020 World 3.1 3.0 2.7 2.9 -0.3 -0.1 Developed economies 2.3 2.2 1.8 1.8 -0.3 -0.1United States of America 2.2 2.9 2.3 2.1 -0.2 0.1Japan 1.9 0.8 0.8 1.0 -0.6 -0.2European Union 2.4 1.9 1.5 1.8 -0.5 -0.3EU-15 2.2 1.7 1.3 1.6 -0.5 -0.2EU-13 4.7 4.3 3.6 3.4 0.0 -0.1Euro area 2.4 1.8 1.4 1.6 -0.5 -0.3Other developed countries 2.5 2.3 2.1 2.2 -0.2 0.0 Economies in transition 2.0 2.7 2.0 2.3 0.0 -0.3South-Eastern Europe 2.