Tue. Apr 23rd, 2019

There is no "recession" on the horizon, but many downside risks

There is no "recession" on the horizon, but many downside risks



The global economy does not face "a recession" on the horizon, but the situation is "precarious" and has "many risks to the downside," said the new chief economist of the IMF, India Gita Gopinath, in an interview with Efe in the frame of the organism spring assembly.

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"To be clear, a recession is not in our scenarios, but we do see many downside risks," Gopinath said shortly after the press conference that serves as a start to the week of meetings between the world's leading economic leaders.

The report "Global Economic Perspectives" of the Fund revised downwards, by two tenths, the growth forecasts for the world economy this year, up to 3.3% and maintained at 3.6% those of the next.

"Although we expect a recovery in 2020, we believe that the situation is precarious," he added.

Among the main points of concern are the commercial tensions, especially the dispute between the United States and China, which are engaged in complex talks after mutually imposing tariffs worth billions of dollars.

"They have been an important factor for the economic slowdown, especially at the end of 2018. It is costly for the global economy not only in commercial terms, but also for business and consumer confidence, so it is harmful," the economist told Efe. , doctor by the University of Princeton and professor in Harvard until the past year.

Therefore, Gopinath, born in Calcutta 47 years ago and an expert in international economics, exchange rates and currencies, expressed the institution's desire to "see a more durable solution to trade tensions, so that they do not escalate to other countries and sectors." "

The less optimistic economic panorama drawn by the Fund responds to the gradual reduction of the forecasts in the United States (from 2.9% in 2018 to 2.3% for this year) and the European Union (from 1.5% to 1%). 3% this year), as well as the progressive moderation of growth in China (from 6.6% to 6.3% this year).

In the opinion of Gopinath, in the case of the USA. and the EU starts from "the causes are long-term, such as low productivity and the dynamics of aging", while the reduction of the growth rate in "China is necessary, because it was growing at a very high rate, driven by the investment".

In this context of global slowdown, the chief economist, who came to the Fund at the beginning of the year to replace Maurice Obstfeld, applauded the decision of the Federal Reserve (Fed) to postpone the next rise in interest rates in the US until next year. .

"The Fed follows a data-driven approach, what we saw at the end of 2018 was a lot of concern that growth would surprise the downside, so pressing the pause button helped free us from that great risk," Gopinath explained. , who has also been an advisor to the government of the Indian state of Kerala, where her parents are from.

"We will see what the data tells us for the future, but inflationary pressures still seem very weak," he added.

Asked if the unusual comments of US President Donald Trump, questioning the decisions of the Fed and questioning its independence could affect the role of the dollar as a global currency, the economist rejected the possibility in the short term.

"The dollar is dominant in trade, finance and reserve currency, at this time there is no real competitor (...) It may happen in the future, but currently we do not see it," he said, marking distances from the rise of currencies like the Chinese yuan.

Finally, she commented on the historic milestone of being the first woman to hold the prestigious position of chief economist of the IMF, one of the most renowned in the global economic elite, in the more than 75 years of the institution's history.

"Women have been ready for this role for a long time," he said.

"It's about time, the fact that it's me is fine," he remarked, "but there have been women before me who would have made it fantastic."

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