Synchronised action of central banks and accommodative monetary policy have delivered half a percentage boost to global growth, International fund (IMF) director Kristalina Georgieva has said, cautioning that the Coronavirus outbreak in China posed a serious threat to the worldwide economy.
“We are during a better place as compared to October, but the expansion remains sluggish and that we see risks still tilted to the downside. Why we believe we are during a better place? We saw reduction of trade tensions before Davos and in Davos and trade tensions were weighting quite severely on growth prospects,” Ms Georgieva said.
“We also saw the advantage of synchronised action of central banks. Accommodative monetary policy has delivered half a percentage boost to global growth. Actually, it’s quite remarkable that 49 central banks cut interest rates 71 times, and resulting in an outcome for growth for 2019 of two .9 per cent,” she said.
“If we did not have this synchronised monetary policy, growth would are within the zone that by IMF assessments lingers into recession. So vital to recognise the contribution monetary policy has made,” she said.
Noting poor trade and industrial output, Ms Georgieva said it’s a more uncertain world than before.
“It may be a more shock-prone world and that we got the evidence virtually days after we presented this outlook with the Coronavirus hitting the Chinese economy but also presenting a risk for growth globally,” she said.
“That point of more uncertain global environment is one i would like to worry very strongly. Australia saw a big risk to its own growth prospects due to forest fires. We had every week of uncertainty due to tensions within the Middle East and now we’ve Coronavirus,” she added.
At an equivalent time, there are other uncertainties that also hang on the planet economy, whether the trade truce between China and therefore the US will become trade peace, whether there would be reform of the trade system that reinforces the role of trade as an engine of growth; what sorts of geopolitical tensions one could be faced throughout the year, Ms Georgieva said.
The IMF director urged policymakers to try to to everything possible to not increase the uncertainty and to create agility in order that they can anticipate and act quickly as these sorts of events occur.
Ms Georgieva said global climate change has now taken central stage.
“On one side it presents a transparent danger to our economies and to livelihoods of individuals . And also because it presents an incredible opportunity for investments in low carbon climate resilient development,” she said.
The world, she said, is faced with “low productivity growth, low economic process , low interest rates, low inflation.”
“And if we are seeking a solution to spice up investments and growth, it’d alright be that concerted climate action is that silver bullets. I”m stressing it because we tend to speak about climate as a risk negative. However, it’s also a chance for growth,” she noted.
One of the explanations for the IMF to slightly downgrade assessments for 2019, projections for 2020 and 2021 was unrest during a number of nations — Chile, Ecuador, Lebanon, Iraq, Hong Kong.
“We got to recognise that inequalities are growing,” she said, ruing that within the OECD member states and in many countries there was a record high or climbing towards a record height.
“Our research shows that raising rising inequalities isn’t good for growth and truly building more inclusive societies facilitates better economic performance,” the IMF chief said.
The IMF, she said, is extremely closely monitoring the impacts of Coronavirus.
The first and most immediate is on domestic demand especially within the parts of China that had been most directly impacted by measures to contain the virus.
“We see some indirect impacts build up around manufacturing, value chains being impacted by the disruption caused by the virus,” she said.
“We see impact on travel and on tourism. This within the short-term is probably going to bring some hamper . within the long-term, we don”t know. we’ve to assess how quickly action is being taken to contain the spread of Coronavirus and the way effective this action is,” Ms Georgieva said.