Global economy chiefs told to reform while going is good
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