Economy Turmoil

DANA Kewangan Antarabangsa (IMF) meramalkan ekonomi sejagat menguncup 1.3 peratus tahun ini kerana krisis ekonomi ternyata lebih serius daripada yang dijangkakan.

Dalam laporan Ramalan Ekonomi Sedunia (WEO) separuh tahunannya, IMF berkata ekonomi sejagat sedang menghadapi kemelesetan sangat buruk disebabkan oleh krisis kewangan yang serius di samping ‘kehilangan keyakinan’.

IMF memberi amaran bahawa ramalan itu ‘tidak menentu’ memandangkan banyak risikonya dan mengatakan bahawa ekonomi dunia sudah terjerumus dalam ‘kemelesetan pasca Perang Dunia Kedua yang paling teruk sejauh ini’.

Ini adalah kali ketiga IMF menurunkan ramalan pertumbuhan dunia bagi 2009.

Proses menstabilkan keadaan kewangan akan mengambil masa yang lebih lama daripada yang dijangkakan disebabkan kerumitan dalam menangani aset lapuk (bad aset) serta memulihkan keyakinan terhadap bank,’ ujar IMF.

Ekonomi terbesar dunia, Amerika, akan menguncup 2.8 peratus tahun ini sementara ekonomi kedua terbesar, Jepun, diramal menjunam sebanyak 6.2 peratus. IMF juga menurunkan ramalan pertumbuhan bagi dua ekonomi gergasi - China kepada 6.5 peratus manakala India, 4.5 peratus.

In the most severe recession since World War II, the global economy is projected to shrink by 1.3 percent in 2009, with a slow recovery expected to take hold next year, according to the IMF’s April World Economic Outlook (WEO).

While the rate of contraction should moderate from the second quarter of 2009 onward, output per capita is projected to decline in countries representing three-quarters of the global economy. Growth is projected to reemerge in 2010, but at 1.9 percent it would be sluggish relative to past recoveries.

IMF Chief Economist Olivier Blanchard told reporters that the world economy was being battered by competing crosscurrents, with the collapse in confidence and demand continuing to pull the economy down and government stimulus measures and natural stabilization mechanisms pulling the economy up.

“This is not the time for complacency, and the need for strong policies, both on the macro and especially on the financial fronts, is as acute as ever. But, with such policies in place, there is light at the end of this long tunnel. World growth can turn positive by the end of this year, and unemployment can start decreasing by the end of next year.”

Need for forceful action

This difficult and uncertain outlook argues for forceful action on both the financial and macroeconomic policy fronts. Past episodes of financial crisis have shown that delays in tackling the underlying problem mean an even more protracted economic downturn and even greater costs, both in terms of taxpayer money and economic activity, the report said.

Policymakers must be mindful of the cross-border ramifications of policy choices. Initiatives that support trade and financial partners-including fiscal stimulus flows-will help support global demand, with shared benefits. Conversely, a slide toward trade and financial protectionism would be hugely damaging to all, a clear warning from the experience of 1930s beggar-thy-neighbor policies.

The greatest policy priority at this juncture is financial sector restructuring. Convincing progress on this front is crucial for an economic recovery to take hold and would significantly enhance the effectiveness of monetary and fiscal stimulus.

The critical underpinning of an enduring solution must be credible loss recognition on impaired assets. To that effect, governments need to establish common basic methodologies for the realistic valuation of securitized credit instruments, which should be based on expected economic conditions and an attempt to estimate the value of future income streams.

Recapitalization methods must be rooted in a careful evaluation of the long-term viability of institutions, taking into account both losses to date and a realistic assessment of the prospects of further writedowns.

Avoiding cross-border strains

Greater international cooperation is needed to avoid exacerbating cross-border strains. Coordination and collaboration is particularly important with respect to financial policies to avoid adverse international spillovers from national actions.

At the same time, international support, including from the IMF, can help countries buffer the impact of the financial crisis on real activity and, particularly in the developing countries, limit its effects on poverty. Recent reforms to increase the flexibility of lending instruments for good performers caught in bad weather, together with plans advanced by the G-20 summit to increase the resources available to the IMF, are enhancing the capacity of the international financial community to address risks related to sudden stops of private capital flows. - IMF Research