ZAMBIA and other countries with emerging markets will need to develop new structural reforms because their economies will worsen this year due to weak pick-up in global growth, says the IMF’s latest World Economic Outlook (WEO) update.
IMF economic counsellor and director of research Maurice Obstfeld says 2016 is going to be a year of ‘‘great challenges’’ and policymakers should be thinking about short-term resilience and the ways they can bolster it.
“This coming year is going to be a year of great challenges and policymakers should be thinking about short-term resilience and the ways they can bolster it, but also about the longer-term growth prospects.
”Those long-term actions will actually have positive effects in the short run by increasing confidence and increasing people’s faith in the future,” he said.
The WEO update underlines the urgent need for policymakers to raise actual and potential growth through a mix of demand support and structural reforms.
The report says structural reforms, in particular, remain critical adding that priorities vary, but many advanced economies would benefit from reforms to strengthen labour as well as measures to tackle private debt overhangs.
According to the update, policymakers in emerging markets and developing economies need to redirect activity to new sources of growth to avoid worsening the current economic challenges.
The update said lifting growth will also ensure continued convergence toward advanced economy income levels.
Emerging economies also need to press on with structural reforms to remove infrastructure bottlenecks, facilitate a dynamic and innovation-friendly business environment.
They also need to bolster human capital through reforms to education, labour and product markets.
The update said the pick-up in global growth is weak and uneven across economies, with risks now tilted toward the emerging markets
It said advanced economies will see a modest recovery, while emerging markets and developing economies face the new reality of slower growth.
The WEO update now projects global growth at 3.4 per cent this year and 3.6 per cent in 2017, slightly lower than the forecast issued in October 2015.
Growth in advanced economies is projected to rise to 2.1 per cent and to hold steady in 2017, a slightly weaker pick-up than that forecast in October.
According to the update, growth forecasts for most emerging markets and developing economies reveal a slower pick-up than previously predicted.
Growth is projected to increase from 4 per cent in 2015, the lowest rate since the 2008-2009 financial crisis to 4.3 and 4.7 per cent in 2016 and 2017, respectively.
The update however projected that these overall numbers fail to do full justice to the diversity of situations across countries.