July 25, 2021

The IMF and the World Bank, restless before the first effects of the commercial war

The IMF and the World Bank, restless before the first effects of the commercial war

The growing concern over the escalation of trade tensions and its negative effects on the global economy will center much of the annual meeting of the International Monetary Fund (IMF) and the World Bank, which will be held this week in Bali (Indonesia).

At the meeting, the Fund will present its new and expected global growth forecasts, which stood at a rate of 3.9% in 2018 and 2019 in July, and that its managing director, Christine Lagarde, already announced a few days ago that will be " less bright. "

The concern has grown as US President Donald Trump has shifted from words to action and imposed multimillion dollar tariffs on imports from China, to which Beijing has responded by levying US products.

In September, USA It imposed Chinese imports worth 250,000 million dollars, and has warned of its willingness to add tariffs to the remaining 267,000 million of the trade balance with Beijing.

"A key issue is that rhetoric is becoming a new reality of trade barriers, which damages not only trade itself, but also investment and manufacturing, as uncertainty continues to grow," Lagarde stressed.

Although the US economy it advances with solidity thanks to the important fiscal cut launched by Trump, begin to perceive signs of slowdown in several advanced economies such as the euro zone and Japan, as well as of moderation in the expansion of China.

"After the aura of optimism of 2017, when global growth seemed widespread, now there is a tendency towards pessimism in the face of the divergence that is beginning to be seen in global activity," Liliana Rojas, Center for Global Development researcher, told Efe. Suarez

Rojas-Suárez stressed that, in addition, the growth of the United States. it is mainly "aupado" by the "pro-cyclical fiscal policies" of Trump.

The Fund will also have to face US criticism of the multilateral system, which Washington considers inoperative.

On the other hand, the shadows begin to grow among emerging economies, with several of them showing signs of vulnerability to the progressive adjustment of financial conditions due to the rise in US interest rates. by the Federal Reserve (Fed).

Argentina was forced to request a huge package of financial assistance to the Fund before the collapse of the peso, which should have reinforced last September, up to 50,000 million dollars, and Turkey has had to forcefully raise its interest rates to contain doubts about the lira.

Precisely, the meeting in Bali takes place on the 20th anniversary of the financial crisis in Southeast Asia, in which there were multimillion-dollar outflows of capital flows and several countries had to resort to the support of the IMF.

Lagarde has also warned of the risks of high indebtedness – the global debt is in the 182,000 trillion dollars, 60% more than at the beginning of the financial crisis of 2007 -, which darkens the horizon in a moment of foreseeable increase of the financing after years of massive monetary stimulus.

On this occasion, special attention will also be given to the possibilities of technologies to expand financial inclusion, and the World Bank will present its Human Capital Index, which will classify countries according to spending on education.

The annual meeting of the IMF and WB will take place in Bali from October 8 to 14, and will bring together ministers of economy and central bankers from around the world, as well as those responsible for the main international banking entities.

Alfonso Fernández


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