IMF head: Improved policies needed to boost growth
Wellington - XINHUA
Global recovery remains weak and uneven as the International Monetary Fund (IMF) and the World Bank kick off their joint fall meetings in Washington, with continuing sluggishness in some regions and growth in others.
The IMF and the World Bank will hold their annual fall meetings from Friday as the global recovery slogs along amid worries over whether growth can be sustained. The meetings come just after IMF economists downgraded their forecast for annual global growth to 3.3 percent from their July estimate of 3.4 percent.
IMF growth forecast for next year also slipped from a previously expected 4 percent to 3.8 percent, demonstrating a recovery that is far from dynamic and prompting concerns that flaccid growth represents a new normal.
Moreover, there is a growing chasm as the U.S. economy leaps ahead while Asia and Europe slow. Economists said the divide is likely to top the meetings' agenda this week as nearly 200 delegates from countries worldwide descend on Washington for the event.
"A strengthening of the outlook for the United States is offset by a worsening situation in the eurozone that reverses some ... prior optimism," Brookings Institution senior fellow Barry Bosworth told Xinhua.
American Enterprise Institute resident fellow Desmond Lachman said it is significant that the IMF has once again downgraded its global economic forecast. But what is more significant is that the IMF is highlighting considerable downside risks to its forecast stemming from the geopolitical situation in Ukraine and the Middle East.
Indeed, the crisis in Ukraine continues and the Islamic State is on the march after having overtaken vast swaths of Iraq and neighboring Syria, a development that has disrupted stability in the region and sparked a U.S. bombing campaign to defeat the terrorists
As for China, the Asian giant's growth is expected to slow to 7.2 percent in 2015, down from 7.4 percent this year and 7.7 percent in 2013, according to World Bank figures released this week, and the country's housing market has slowed this year. Still, growth numbers remain high, especially considering the lackluster state of growth elsewhere in the world.
Another Asian ray of hope is India.
"The outlook for India looks bright with a new Modi government," Lachman told Xinhua, referring to the recent election of Prime Minister Narendra Modi, a pro-business reformer whose supporters hope will bring a return to rapid growth on the sub-continent.
By sharp contrast, Japan is forecast to grow by a mere 0.9 percent this year, a slip from July's 1.6 percent estimate. While bond purchases have injected much-needed lifeblood into the economy, a three-point sales tax hike in April stifled consumer spending more than economists had expected.
Bosworth of the Brookings Institution said Asia is trying to adjust to a world in which it cannot rely on strong demand from advanced economies. "Asia will grow, but not at the high rates. Still it remains the best performing region," he said.
In the United States, while the stock market is surging and corporate profits are at a years-long high, many Americans complain that gains at the top have not trickled down to the middle class, as millions are still unemployed despite a recent drop in the jobless rate.
The unemployment rate earlier this month dropped to a six-year low of 5.9 percent, but economists said the number is deceiving, as millions have quit the job hunt out of sheer frustration.
With the jobless rate counting only those actively seeking work, a more telling figure is the labor force participation rate, which measures the percentage of the population that is employed. That stands at a low not seen since 1978.
Recent college graduates have it particularly bad, as many are paying down massive educational loans while the price of a university education goes up dramatically.
People out of work more than six months -- the so-called long-term unemployed -- are finding the job hunt an uphill climb as potential employers tend to steer clear of applicants who have not worked for lengthy periods
Many argue that when all these factors are tallied, they do not add up to a strong U.S. economy. "I do not think it (growth) will exceed three percent on a year-over-year basis," said Bosworth.