Gov’ts prod­ded on re­forms while economies strong

Manila Bulletin - - Business News -

WASH­ING­TON (AFP) – 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.

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 al­so­rans 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 wreaked 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.

One key is­sue of busi­ness dur­ing the three days of meet­ings, which will in­clude a meet­ing of G20 fi­nance min­is­ters, is a huge cap­i­tal in­crease for the World Bank to en­hance its de­vel­op­ment lend­ing.

The G20 will also see a Euro­pean push to dis­cuss how to tax the in­ter­na­tional earn­ings of big tech gi­ants like Google, Ap­ple, Ama­zon and Face­book.

Wor­ries about geopol­i­tics were an un­der­cur­rent of dis­cus­sions as the an­nual meet­ing of eco­nomic lead­ers from around the world con­vened: North Korea's nu­clear threat, the Mid­dle East con­flicts, Bri­tain's pullout from the Euro­pean Union, and the new­est point of ten­sion; the vote for in­de­pen­dence by Spain's rich Cat­alo­nia re­gion.

On Tues­day, IMF chief econ­o­mist Mau­rice Ob­st­feld warned of po­ten­tial ''spillovers'' in Europe if the two sides can­not smoothly re­solve their dif­fer­ences.

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