Indonesian President Joko Widodo is deeply concerned about the future of the global economy. In his speech to the annual meetings of the International Monetary Fund and the World Bank in Bali last week he warned that "relations between the major economies are looking more and more like the Game of Thrones," the dystopic fantasy of a world in constant struggle between feuding dynasties. Worried that the "situation might be more threatening than the financial crisis 10 years ago," Widodo implored the assembled economic grandees to cooperate and avoid a future that would inflict a "tragic price" on the "defeated" and the "winners."
While Widodo's warnings were more colorful than most, he is not alone in his concern. Even though the global economy looks set to continue its expansion, there is mounting anxiety about geopolitical risks. The list of potential dangers is well known, but there is also fear of "black swans" that could trigger a downturn. Leaders must reaffirm their commitment to the principles that have enabled and sustained growth, and reinforce global economic institutions and mechanisms. Surprisingly, that is easier said than done.
The IMF expects the world economy to expand 3.7 percent in 2018 — the same as 2017 — but that is a decrease from 3.9 percent expansion forecast in July. The U.S. economy is projected to grow 2.9 percent, the largest increase since 2005, but it will slow to 2.5 percent next year as momentum injected by the Trump tax cuts fades. China will grow 6.6 percent this year, but that pace will drop next year to 6.2 percent, the slowest rate since 1990. Japan's economy is forecast to expand 1.1 percent this year — there was no change in the forecast — and slow to 0.9 percent in 2019. World trade is slowing, though: The IMF projects global trade to expand 4.2 percent in 2018, a decrease from the 5.2 percent growth of 2017, and slowdown from the 4.8 percent predicted in July.
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