Finance Minister Alfonso Prat-Gay arrived in China yesterday, where he is expected to be joined by his second in command Pedro Lacoste and Central Bank chief Federico Sturzenegger in a bid to build bridges with some of the world’s most powerful countries.
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Looking forward, she continued, “the global economy is undergoing a number of important transitions and we are focused on helping our membership navigate these successfully”.
The IMF also noted any future prospects for global growth “could be derailed by market turbulence, the oil price crash and geopolitical conflicts”. This calls for a strong policy response, both national and multilateral, including from the G20.
In its October global economic outlook report, the International Monetary Fund had initially forecast a growth rate of 3.6 per cent for 2016 and 3.8 per cent for 2017.
Also Friday, China’s central bank chief promised to avoid weakening its yuan to boost sagging exports as he tried to reassure nervous financial markets about his government’s handling of its economy and currency.
China’s vice finance minister Zhu Guangyao said on Thursday that Beijing did recognise the risks facing the global economy. Advanced economies too have tighter financial conditions due to falls in asset prices. The IMF warned that domestic vulnerabilities could further increase emerging market stress.
She added that the current global downturn in commodity prices meant that producers – particularly oil exporters – were having to face up to a new reality. Remedies remain thin on the ground; nonetheless the report posits some suggestions. However, a comprehensive approach is needed to reduce over-reliance on monetary policy.
“We don’t need to launch a global fiscal stimulus package…in some countries, like France, we must continue our efforts to rebalance the budget… other countries may have more capacity and should use their budgetary capabilities to support global growth”, he said. They highlighted the importance of further strengthening the pro-growth and pro-stability aspects of the consolidation, including by scaling back distortionary tax expenditures, reforming the property tax, and reducing the tax code’s bias toward debt.
There is less room for complacency now.
A two-year-old G-20 plan to goose global economic growth by 2 percentage points over five years has fallen well short of the group’s aspirations.
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Anxious about turbulence in emerging markets, the International Monetary Fund has joined emerging markets in pushing the G-20 to develop new short-term credit lines like the ones the Fed used during the crisis to help countries cope with major capital outflows.
