Global econ­omy chiefs told to re­form while go­ing is good

Iran Daily - - Global Economy -

Fi­nance chiefs from around the world were warned Thurs­day to get their houses in or­der while the global econ­omy is strong and to be ready for pos­si­ble shocks in the fu­ture.

World Bank Pres­i­dent Jim Yong Kim and In­ter­na­tional Mone­tary Fund Man­ag­ing Di­rec­tor Chris­tine La­garde said that coun­tries must ad­dress their mount­ing debts and deep­en­ing in­equal­i­ties now, be­fore pos­si­ble set­backs that could come as the era of cheap money from ma­jor cen­tral banks nears an end, AFP wrote.

That in­cludes re­duc­ing sov­er­eign bor­row­ing and de­pen­dence on often fickle flows of port­fo­lio cap­i­tal that have el­e­vated the prices of in­vest­ment as­sets like stocks and prop­erty.

It also means rec­og­niz­ing the po­ten­tial up­heaval that comes with the rapid changes in tech­nol­ogy that can quickly turn com­pet­i­tive in­dus­tries into also-rans in coun­tries try­ing to move up the eco­nomic lad­der.

“Af­ter sev­eral years of dis­ap­point­ing growth, the global econ­omy has be­gun to ac­cel­er­ate,” Kim said at the open­ing of the an­nual Imf-world Bank meet­ings in Wash­ing­ton.

“Trade is pick­ing up, but in­vest­ment re­mains weak. We’re con­cerned that risks such as a rise in pro­tec­tion­ism, pol­icy un­cer­tainty, or pos­si­ble fi­nan­cial mar­ket tur­bu­lence could de­rail this frag­ile re­cov­ery.

“Coun­tries need to build re­silience against the over­lap­ping chal­lenges we face to­day,” he added, point­ing to cli­mate change, famine and nat­u­ral dis­as­ters like the hur­ri­canes which have wrecked economies across the Caribbean.

La­garde said that even though the IMF has just raised its es­ti­mates for global eco­nomic growth — to a healthy 3.6 per­cent this year and 3.7 per­cent in 2018 — “it is not time to be com­pla­cent”.

“It is time to take those pol­icy de­ci­sions that will ac­tu­ally en­able more peo­ple and more coun­tries to ben­e­fit from that re­cov­ery that should be made sus­tain­able,” she said.

“That is the ques­tion that we will put to the pol­i­cy­mak­ers, the fi­nance min­is­ters, and the gov­er­nors of cen­tral banks who will be at­tend­ing the meet­ings.”

La­garde said that de­spite the now nearly fully-fledged re­cov­ery from the fi­nan­cial cri­sis that erupted in 2008, 47 coun­tries still ex­pe­ri­enced neg­a­tive growth last year, many of them small and frag­ile economies.

She said in­equal­ity, the gap be­tween the rich and the poor, was in par­tic­u­lar need of tack­ling.

“Far too many peo­ple across all types of economies are see­ing their as­pi­ra­tions lim­ited by the im­pact of tech­nolo­gies and the reper­cus­sions of ex­ces­sive in­come in­equal­ity,” La­garde said.

As a re­sult, po­lit­i­cal ten­sions are spik­ing and skep­ti­cism is ris­ing about the ben­e­fits of the kind of glob­al­iza­tion and lib­er­al­iz­ing trade that the IMF and World Bank sup­port. Most econ­o­mists op­pose Prime Min­is­ter Shinzo plan to re­di­rect some rev­enue from a planned sales-tax in­crease to child care and ed­u­ca­tion be­cause it would add to Ja­pan’s mas­sive debt bur­den, a poll showed.

The econ­o­mists said the gov­ern­ment elected in an Oc­to­ber 22 gen­eral elec­tion should pri­or­i­tize re­form of Ja­pan’s re­stric­tive la­bor mar­ket and its so­cial se­cu­rity sys­tem, Reuters re­ported.

Cam­paign­ing be­gan on Tues­day in a race that pits Abe’s Lib­eral Demo­cratic Party (LDP) against the fledg­ling Party of Hope led by Tokyo Gover­nor Yuriko Koike and other smaller par­ties con­test­ing seats in Ja­pan’s more pow­er­ful lower house of par­lia­ment.

Abe prom­ises to press ahead with the 2019 hike in sales tax to 10 per­cent from eight per­cent but wishes to use some of the ex­tra rev­enue for child care and ed­u­ca­tion, in­stead of the orig­i­nal plan to re­pay gov­ern­ment debt. Koike’s Party of Hope, by con­trast, says it would freeze the tax hike to en­sure eco­nomic re­cov­ery.

“Con­sid­er­ing huge pub­lic debt, which is at more than twice the size of the econ­omy, bal­anc­ing fis­cal rev­enue and spend­ing is a press­ing is­sue,” said At­sushi Takeda, chief econ­o­mist at Itochu Eco­nomic Re­search In­sti­tute.

“Fi­nan­cial re­sources for new poli­cies should be fi­nanced by cut­ting other gov­ern­ment spend­ing.”

Twenty-three of 34 econ­o­mists said they do not sup­port Abe’s plan to re­al­lo­cate the sales tax rev­enue, the poll taken be­tween Oc­to­ber 3 and 12 showed.

And 27 of 35 econ­o­mists ex­pect the gov­ern­ment will in­crease the tax as planned in 2019. Abe has al­ready post­poned planned in­creases twice.

Asked about which eco­nomic ar­eas the new gov­ern­ment should fo­cus on af­ter the elec­tion, 22 econ­o­mists in the poll se­lected la­bor mar­ket re­form and 21 picked med­i­cal and so­cial se­cu­rity re­form.

Seven­teen econ­o­mists said the gov­ern­ment needs to fo­cus on mea­sures to im­prove pro­duc­tiv­ity, while nine ad­vo­cated poli­cies to en­cour­age wage growth and a re­cov­ery in con­sumer spend­ing. Four­teen re­spon­dents fa­vored child care and ed­u­ca­tion.

Turk­ish Lira Euro Bri­tish Pound Aus­tralian Dol­lar Ja­panese 100 Yen Crude Oil Gold Cop­per 0.2739 1.1840 1.3290 0.7836 0.0089 $51.00 $1300.30 $3.03 Chi­nese Yuan UAE Dirham Kuwaiti Di­nar Iraqi Di­nar Saudi Riyal Sil­ver Plat­inum Wheat 0.1519 0.2722 3.3095 0.0008 0.2666 $17.03 $934.10 $431.75

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