– The outcome of the International Monetary Fund’s (IMF) multilateral consultations on global imbalances is key to averting damaging market moves prompted by concerns those imbalances won’t be addressed, said the World Bank’s Senior Vice President and Chief Economist, Francois Bourguignon, Monday, according to World Bank Press Review.
Global markets need a clear signal that the world’s major economies are serious about rectifying potentially destabilizing imbalances, he said in a recent interview. The IMF has had bilateral talks with the five participants – the US, Euro-zone, China, Japan and Saudi Arabia and plans are underway for roundtable talks between those countries.
– All the big players are there… (and) it’s important for a signal to be sent that the issue (of imbalances) is being considered very seriously, Bourguignon said.
– But at this stage, the risk would be for this signal not to be sent and some operators in markets to take the wrong decisions based on their own interpretation…and because of that capital flows may change destinations and if this is the case we’re in trouble, he said.
Bourguignon said the debate over whether the US or China bore the bulk of the responsibility for global balances was plagued by ‘a lot of rhetoric’ that obscured the two countries’ shared obligations.
– This is more about politics than it is about economics, but it does indicate that it’s necessary for the US to increase (its) saving rate and to reduce the deficit of the current account,’ he said.
– And it’s a necessary and good policy for China to put more emphasis on domestic consumption, (and) on domestic markets.
Kilde: www.worldbank.org
