IMF warns against protectionist policies
> World economy moving sideways and strong, sustainable growth still elusive, says chief economist
WASHINGTON: The International Monetary Fund (IMF) warned on Tuesday against the populist, inwardlooking policies now tempting voters in many of the world’s advanced economies.
The global economy is showing some stability but is failing to break out of the low growth that has been persistent since the 2008 financial crisis. This failure has fuelled political movements against trade, migration and globalisation that could actually impair future prosperity, the Washington-based crisis lender said.
The IMF left its global economic forecasts Tuesday at 3.1% growth this year and 3.4% in 2017, both unchanged from the previous update in July.
“Strong, sustainable, balanced and inclusive growth .... still eludes us,” chief economist Maurice Obstfeld said Tuesday after the release of the IMF’s World Economic Outlook report. “Global growth remains weak, even though it shows no noticeable deceleration over the last quarter.”
The IMF forecast GDP growth in advanced economies of about 1.7% in 2016-17, while emerging markets and developing economies are around 4.4% as a group.
“Taken as a whole, the world economy is moving sideways,” Obstfeld said. “Without determined policy action to support economic activity over the short and longer terms, subpar growth at recent levels risks feeding on itself through the negative economic and political forces it is unleashing.”
Already, risking political uncertainty is hindering business investment and nearterm economic activity, the report found.
“The Brexit vote and the ongoing US presidential election campaign have highlighted a fraying consensus about the benefits of cross-border economic integration,” the IMF said. “Concerns about the impact of foreign competition on jobs and wages in a context of weak growth have enhanced the appeal of protectionist policy approaches, with potential ramifications for global trade flows and integration more broadly.”
British Prime Minister Theresa May said on Sunday that her government would begin negotiations in March 2017 to quit the European Union, after the June Brexit referendum.
In the United States, both majorparty presidential candidates oppose the Trans-Pacific Partnership (TPP), a trade deal to be considered late this year in Congress, and have called for the 22year-old North American Free Trade Agreement with Canada and Mexico to be scrapped or renegotiated.
Meanwhile, prospects for the Transatlantic Trade and Investment Partnership, still in negotiation between the US and the European Union, appear dim in the face of opposition from politicians in Europe.
The biggest change in the World Economic Outlook was for the United States, where the IMF slashed its 2016 growth forecast by 0.6 percentage points to 1.6%, after a disappointing first half blamed partly on weak business investment. The IMF predicted eurozone growth to remain around 1.6% for 2016-17; the forecast for Germany has strengthened since July while expectations were cut for France and Italy.
The short-term projection for Japan was raised in light of fiscal and monetary stimulus, while China’s gradual slowdown is slated to continue. The IMF slightly raised its forecast for India – now the world’s fastest-growing major economy – to 7.6% for 2016-17.
Particularly in rich countries, persistently slow growth has become the norm since the 2008 global financial crisis, amid significant government stimulus measures and accommodative monetary policy at or near record levels.
“Tepid growth risks becoming selfperpetuating as investment falls, productivity growth declines, labour markets become less dynamic and human capital erodes,” Obstfeld wrote in a foreword to the IMF report. The report encouraged fiscal stimulus where government budgets allow, along with long-needed structural reforms.
“It is vitally important to defend the prospects for increasing trade integration,” Obstfeld wrote. – dpa
This file photo taken on Sept 29 shows Air Berlin jets parked on the tarmac at Tegel airport in Berlin.