IMF warns of economic downturn – Financieele Dagblad

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The world economy seems to be caught in a trap of low growth. The hope that growth this year will switch to a higher gear, is already gone. The International Monetary Fund (IMF) has lowered forecasts for the global economy and warns that there is only very little need to go under.

After the plus of 3.1% in 2015, the fund expects for this year a marginal improvement in global growth, according to the world economic Outlook, the report of the semi-annual review of the world economy. There probably is 3.2% off the bus, while there had been half a year ago 3.6% ahead. The promised 3.8% for 2017 has been adjusted to 3.5%.

weakening widely

the weakening of the outlook applies across the board. Both in developed countries and in emerging markets involves difficult than expected. Only forecasts for China and emerging Europe have been revised slightly upwards.

According to chief economist Maurice Obstfeld, the emerging economies particularly affected by low commodity prices , fewer outlets, declining trade and declining investment. The latter is partly because it is difficult and especially has become more expensive to borrow money. In turn, developed countries suffer from an aging population, low productivity growth and persistently high levels of debt.

Himself nourishing low growth

Obstfeld fears that low growth will feed themselves. “Persistent low growth creates scars and leading again that potential growth and thereby reduced demand and investment,” he says in a note on the report. The problem of low growth which is above that there is no more room to make mistakes, as the economy very quickly goes under. Moreover, the risks to growth only become bigger.

First Obstfeld calls the turbulence in the financial markets. Since summer, there have been two rounds last year of great turmoil, with market participants reacted more violently than was perhaps fundamentally justified. The risk is that returns the turbulence and taking hold on the real economy.

In addition, the sharp increase in political and geopolitical unrest. Refugee flows and terrorist attacks in Europe, the possible ‘Brexit “the notion that the European project would falter, the growing aversion to globalization and the possible consequences of climate phenomenon El Niño can all take a very heavy toll on the global economy.

strong response required

According to Obstfeld, it is important that their behavior is powerful. Policymakers need structural, fiscal and monetary measures to try to stimulate growth. “This is valuable in itself, but also provides an important insurance against downside risks,” the economist.

It is important that central banks maintain their wide policy, increasing inflation expectations and keep deflation at bay. In addition, politicians should liberalize product and service markets and flexible labor markets. Finally, play an important role for infrastructure investments and aid for private R & amp;. D projects

But Obstfeld goes one step further. He also wants policymakers put a package ready in case the negative scenario becomes reality and the real world from slipping into “secular stagnation” a perpetual economic stagnation. For this situation, all policy instruments should be used, but also coordinated internationally.

Netherlands to make the IMF in the World Economic Outlook little dirty words. It occurs only once in the text, namely as an example of a country that has taken advantage of economically strong structural measures. In particular, further expanding the labor market reforms of the mid-nineties.

The growth in the Netherlands is 1.8% and 1.9 % respectively in 2016 and 2017 well above the average in the eurozone, where 1.5% and 1.6% is subscribed. The Dutch inflation rate in those years reduced to 0.3% and 0.7% respectively. Unemployment falls progressively further from 6.9% last year to 6.2% in 2017.

The surplus on the current account remains above 10% of GDP. The European Commission has a three-year average of 6% for this indicator as an upper limit. The Netherlands has been a much too high surplus and that could threaten the stability of the euro. Netherlands produces more than it consumes and converts the difference abroad. This parasitic our country demand abroad, critics say.

Last year the Netherlands were still urged to more infrastructural investments domestic demand hunting – with the underlying thought that then subsequently could benefit southern European countries – but that recommendation was omitted this time. Finance Minister Jeroen Dijsselbloem had made quite angry about that recommendation, precisely because the Netherlands has its infrastructure in order. Netherlands should not be confused in this case Germany, the minister wanted to say.