A year ago, economic activity was accelerating in almost all regions of the world, but much has changed since then. There is escalating trade tensions between the U.S. and China, credit tightening in China, macroeconomic tensions in Argentina and Turkey and disruptions in the auto industry in Germany, but also tightening financial conditions coupled with monetary policy normalization in the major advanced economies that have weakened the global expansion since the second half of 2018.

Growth contraction in 2019 is projected for 70% of the world economy . Global growth slowed to 3.6% in 2018 and would continue that trajectory to stand at 3.3% this year.

The downward growth revision of 0.2 percentage points for 2019 versus the January projection is also widespread. It reflects negative revisions for several large economies, including the euro area, Latin America, the United States, the United Kingdom, Canada and Australia.

Although this year got off to a weak start, a rebound is forecast for the second half of the year to bring global economic growth to 3.6% in 2020, but this recovery is precarious and depends on a rebound in emerging market and developing economies, whose growth would rise from 4.4% in 2019 to 4.8% in 2020.

Specifically, it is based on the expected revival of growth in Argentina and Turkey and some improvement in the situation in another group of developing economies that are under stress and, consequently, subject to considerable uncertainty.

Although the world economy continues to expand at a reasonable rate and baseline projections do not envisage a global recession, there are numerous downside risks. Tensions over international trade policy could flare up again and spill over into other areas, such as the automotive industry, causing serious disruptions to international supply chains.

In systemically important economies, such as the eurozone and China, growth could surprise on the downside, while risks surrounding Brexit remain acute . A downturn in market sentiment could quickly tighten financing conditions in an environment marked by heavy public and private sector indebtedness in many countries.

Given these risks, it is imperative to avoid costly policy mistakes. Policymakers must cooperate to prevent policy uncertainty from chilling investment. Fiscal policy will need to strike a balance between supporting demand, protecting social spending and keeping public debt on a sustainable path, although the optimal combination of these measures will depend on each country's circumstances.

Across all economies, it is imperative to take action to stimulate potential output, improve inclusiveness and build resilience. Closer multilateral cooperation is needed to resolve trade conflicts, address climate change and cybersecurity risks.

The global economy is at a delicate juncture. If any of the serious downside risks materialize, the expected recovery in stressed, export-dependent and highly indebted economies may be derailed. In that case, policymakers will have to make adjustments. Depending on the circumstances, synchronized but country-specific fiscal stimulus policies may be needed, complemented by central bank actions on the money supply to boost the economy.

Excerpt from an article by Gita Gopinath, Chief Economist of the International Monetary Fund, published in the magazine of the World Economic Forum.