Thousands of delegates from the International Monetary Fund (IMF) and the World Bank have already landed in Bali to hold their annual meeting here, a kind of big week of the global economy where growth forecasts, risk analysis and analysis will abound. the recipes that must cure international imbalances. Once on the island, it is difficult not to notice the contrast between the landscape of sunny and very blue beaches and the smiles with which the locals welcome with the encouragement of the Fund's technicians. Because in the face of the good news of last year, there is now a pessimism that has become more evident in recent months. Last week, the head of all this, Christine Lagarde, verbalized when she warned that the risks that were seen long ago have "begun to materialize".
And among the reasons for concern, commerce is king. Two years ago, Donald Trump won the US elections with his nationalist rhetoric and hatred for the German cars that circulate on the streets of New York. But only now it seems obvious that the commercial war drums are serious. Trump has announced tariffs on Chinese products worth 260,000 million dollars provoking the immediate response of the authorities of Beijing, which announces barriers for US imports worth 110,000 million. These tariffs already affect 2.5% of world trade, according to ING. "The biggest risk lies in a generalized increase in the tariffs imposed by the US against the main economic blocs, awakening a strong response from China and the EU," warns a report by BBVA Research. As the managing director of the IMF said before leaving for Bali, "the rhetoric is becoming reality."
Faced with these risks, the Fund has its recipes. It asks the countries that it considers "like-minded" to promote trade agreements for its part, leaving behind the most reluctant to collaborate. And it proposes to reinforce international trade rules to dilute the harmful effects of state subsidies.
But the truth is that this reality is already causing a decline in world activity. It is certain that the IMF will lower this week its perspective of global growth for this year, now at 3.9%. And the mission that visited Madrid last week announced that the same will happen with its forecasts for Spain, which in 2018 will go from 2.8% to 2.7%. Next year will remain at 2.2%: still above the European average, but in a clearly descending line.
There are signs, therefore, that global growth has stagnated. And of a certain desynchronization between advanced and developing economies. The challenge of emerging countries has become more visible in recent months with the problems of countries such as Turkey, Argentina, Brazil or South Africa. This crisis, for the moment, has had a very limited contagious effect. But in the IMF they warn that this can change quickly.
They are not the only clouds that will be spoken of in Bali. Also worrying is the tightening of financial conditions in the US, which comes hand in hand with the revaluation of the dollar and the continuous rises in interest rates. Judging by the words of the president of the Federal Reserve, these increases are going to continue a long season. Jerome Powel suggested last week that he sees room for rates to go over 3%. A gigantic leap if you remember that three years ago they were around 0%.
The IMF also detects another risk that must be fought: the loss of confidence in institutions in a growing number of countries. The success of populist leaders in such distant places as the US and the Philippines – and yesterday in Brazil – has very different factors, but in the Washington-based organization they see some common patterns that explain the loss of trust in institutions: large social groups that have been left out of welfare until the throes of the financial crisis that erupted ten years ago through corruption. The only key to fight against this institutional deterioration is, according to Lagarde said last week, "invest in people: health and education."