时间：2022-09-24 07:12:32
The world is adrift. That is the conclusion of this economist, who got to sip buckets of green tea with officials and investors at the annual meetings of the IMF and World Bank in Japan these last few days.
The mood, unsurprisingly, was somber. The IMF’s recent downgrades of its growth forecasts, merely acknowledging reality, didn’t help. More worrying were the deep disagreements about the appropriate policy response.
Above all, the world is seemingly devoid of political leadership at the moment. Over the next three months, it is not data, but politics that will decide whether the global economy is make or break in 2013.
by the numbers
We drew several conclusions from the annual meetings. First, fiscal policy is broken. The mess in Europe is obvious, but delegates, rightly, were equally worried about the lack of fiscal clarity in the US. Even if a last-minute compromise can blunt the impact of the looming fiscal cliff, the drag from the public sector in the US might be bigger next year than in the euro zone.
But the West is not alone. In China, it is not yet clear what the government’s response will be to the current downturn. Fiscal policy, as our chief China economist, Qu Hongbin, has noted, will be decisive in stabilizing growth. But, apart from a trickle of project approvals in recent weeks, there is no apparent roadmap of how the country will pull its fiscal levers in the coming quarters.
Meanwhile, in Japan, political gridlock has so far prevented the passage of legislation to finance the ongoing budget. The government is still confident it will obtain a last minute passage, enabling it to stick to its budget plans. But it already had to postpone disbursement of tax grants to local governments to preserve cash.
Second, plenty of controversy surrounds the appropriate path towards fiscal consolidation. In its World Economic Outlook report – heatedly debated at the meetings – the IMF concluded that fiscal multipliers are larger than hitherto assumed. Up to now, the rule of thumb had been that a 1 percentage point change in a country’s structural budget balance would change growth by 0.5 percentage points. The latest report suggests that the effect could be much larger, around 0.9-1.7 percentage points. In other words, fiscal retrenchment cuts growth by more than anticipated.
The findings were seized upon by opponents to austerity. IMF Managing Director Christine Lagarde and German Finance Minister Wolfgang Schaeuble discussed the topic publicly (though in a perhaps more civil manner than portrayed by the international media). Lagarde took a more lenient approach to the issue, pointing to the desirability of pacing fiscal retrenchment to avoid harming growth, while Schaeuble insisted on adherence to a strict timetable. The issue isn’t resolved.
Third, politics is now the main risk. While global growth may have started to stabilize at a below-trend pace, worries persist that policy uncertainty and indecision could make matters worse. The fiscal cliff will presumably not be addressed until after the US presidential and congressional elections on November 6, leaving precious little time to avert a growth shock in the first quarter.
A crucial EU summit was held on October 18-19. The agenda was hugely ambitious, including discussions over banking supervision, legacy debt treatment, steps towards fiscal integration and the growth compact. Substantive progress might be hard to achieve with still widely divergent objectives among member states.
And again, it’s not just the West that’s fumbling along. In China, the Communist Party will hold its congress on November 8. However, this will not complete the transition process, which will last until March 2013 when the top government posts change hands. Markets appear hopeful that greater clarity about China’s reform process and, in tandem, the intended stimulus measures, will arrive shortly after the party congress. But it may take a little longer for the fog to lift and visibility to improve.
Politics in Japan is stuck as well. The government appears ready to call an election in the coming months, suggesting that major policy changes will be put off for quite some time, including additional fiscal support for the economy. What’s more, polls currently indicate that the incoming government, likely led by the opposition Liberal Democratic Party, may not command a large enough majority to adopt decisive reforms.
The fourth quarter, in short, is all about political risk. Growth may have started to stabilize, but it is too fragile to withstand policy missteps in the world’s leading economies. For what it’s worth, we still think that China at least will start to fire up again early next year. But that assumes that the political transition proceeds smoothly and important decisions aren’t delayed.
In addition, we think that investors still underestimate the impact of renewed monetary easing on emerging markets. The money train has left the station and emerging market assets are the next stop. Curiously, few people in Tokyo talked about the damage that waves of easy liquidity can ultimately do to financial stability in parts of Asia.
Perhaps it’s too early to talk about this. But, if politics in the next few months doesn’t derail the global economy altogether, we suspect that at an annual meeting in the not-too-distant future that is precisely the topic that will need to be discussed.