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The Organization for Economic Co-operation and Development (OECD) is predicting an economic contraction for the global economy this year – including the potential for Canada’s output to sink almost 10 per cent – as governments and households pile on debt due to the COVID-19 pandemic.
“It’s a sea of red for 2020. Some recovery in 2021, but not enough to go above the level of 2019,” OECD Secretary General Angel Gurría told BNN Bloomberg’s Jon Erlichman Wednesday. “It’s that bad.”
“It’s going to be tough for the next 18 months because we believe the recovery is going to be like a U-shape, rather than a V-shape.”
The OECD presented “two equally likely scenarios” in its forecast for the first time, rather than a baseline scenario, amid lingering uncertainty around the virus’s potential future impact.
The Paris-based organization estimates the global economy shrinking either six per cent this year or 7.6 per cent this year. Meanwhile, the OECD sees the Canadian economy contracting by either eight or 9.4 per cent in 2020.
“It’s an open economy, therefore more vulnerable to everything that is going on right now,” Gurría said in reference to Canada.
“But we see that in the case of a second wave, should we have a recurrence of this phenomenon, of course we’d have to maybe look at confining some sectors, some cities, some areas, and therefore, we would have a second impact that would pile up.”
Canadian Prime Minister Justin Trudeau played down the idea of the government releasing its traditional fiscal update when speaking to reporters Tuesday.
“There are so many things that we simply don’t know, that making projections about what our economy could look like six months from now or a year from now would be an exercise in invention and imagination,” Trudeau said.
Gurría acknowledged it is “very difficult” to set projections right now.
“We can only [put forth] as great an effort as we can,” he said.
With respect to its own forecast, Gurría said OECD applied modelling, assumptions and basic fundamentals to present possible future scenarios.
“What we really do not know is whether there will be a recurrence [of new COVID-19 cases],” he said. “What we’re saying is, let’s be extremely prudent in the way we are looking at forecasting, looking at projections going forward because there may be this possibility.”
Source:- BNNBloomberg.ca
(Bloomberg) — The head of the International Monetary Fund warned the US that the global economy is closely watching interest rates and industrial policies given the potential spillovers from the world’s biggest economy and reserve currency.
“All eyes are on the US,” Kristalina Georgieva said in an interview on Bloomberg’s Surveillance on Thursday.
The two biggest issues, she said, are “what is going to happen with inflation and interest rates” and “how is the US going to navigate this world of more intrusive government policies.”
The sustained strength of the US dollar is “concerning” for other currencies, particularly the lack of clarity on how long that may last.
“That’s what I hear from countries,” said the leader of the fund, which has about 190 members. “How long will the Fed be stuck with higher interest rates?”
Georgieva was speaking on the sidelines of the IMF and World Bank’s spring meetings in Washington, where policymakers have been debating the impacts of Washington and Beijing’s policies and their geopolitical rivalry.
Read More: A Resilient Global Economy Masks Growing Debt and Inequality
Georgieva said the IMF is optimistic that the conditions will be right for the Federal Reserve to start cutting rates this year.
“The Fed is not yet prepared, and rightly so, to cut,” she said. “How fast? I don’t think we should gear up for a rapid decline in interest rates.”
The IMF chief also repeated her concerns about China devoting too much capital and labor toward export-oriented manufacturing, causing other countries, including the US, to retaliate with protectionist policies.
China Overcapacity
“If China builds overcapacity and pushes exports that create reciprocity of action, then we are in a world of more fragmentation not less, and that ultimately is not good for China,” Georgieva said.
“What I want to see China doing is get serious about reforms, get serious about demand and consumption,” she added.
A number of countries have recently criticized China for what they see as excessive state subsidies for manufacturers, particularly in clean energy sectors, that might flood global markets with cheap goods and threaten competing firms.
US Treasury Secretary Janet Yellen hammered at the theme during a recent trip to China, repeatedly calling on Beijing to shift its economic policy toward stimulating domestic demand.
Chinese officials have acknowledged the risk of overcapacity in some areas, but have largely portrayed the criticism as overblown and hypocritical, coming from countries that are also ramping up clean energy subsidies.
(Updates with additional Georgieva comments from eighth paragraph.)
©2024 Bloomberg L.P.
The head of the International Monetary Fund warned the US that the global economy is closely watching interest rates and industrial policies given the potential spillovers from the world’s biggest economy and reserve currency.
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Published Apr 18, 2024 • 2 minute read
(Bloomberg) — The head of the International Monetary Fund warned the US that the global economy is closely watching interest rates and industrial policies given the potential spillovers from the world’s biggest economy and reserve currency.
“All eyes are on the US,” Kristalina Georgieva said in an interview on Bloomberg’s Surveillance on Thursday.
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The two biggest issues, she said, are “what is going to happen with inflation and interest rates” and “how is the US going to navigate this world of more intrusive government policies.”
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The sustained strength of the US dollar is “concerning” for other currencies, particularly the lack of clarity on how long that may last.
“That’s what I hear from countries,” said the leader of the fund, which has about 190 members. “How long will the Fed be stuck with higher interest rates?”
Georgieva was speaking on the sidelines of the IMF and World Bank’s spring meetings in Washington, where policymakers have been debating the impacts of Washington and Beijing’s policies and their geopolitical rivalry.
Read More: A Resilient Global Economy Masks Growing Debt and Inequality
Georgieva said the IMF is optimistic that the conditions will be right for the Federal Reserve to start cutting rates this year.
“The Fed is not yet prepared, and rightly so, to cut,” she said. “How fast? I don’t think we should gear up for a rapid decline in interest rates.”
The IMF chief also repeated her concerns about China devoting too much capital and labor toward export-oriented manufacturing, causing other countries, including the US, to retaliate with protectionist policies.
China Overcapacity
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Article content
“If China builds overcapacity and pushes exports that create reciprocity of action, then we are in a world of more fragmentation not less, and that ultimately is not good for China,” Georgieva said.
“What I want to see China doing is get serious about reforms, get serious about demand and consumption,” she added.
A number of countries have recently criticized China for what they see as excessive state subsidies for manufacturers, particularly in clean energy sectors, that might flood global markets with cheap goods and threaten competing firms.
US Treasury Secretary Janet Yellen hammered at the theme during a recent trip to China, repeatedly calling on Beijing to shift its economic policy toward stimulating domestic demand.
Chinese officials have acknowledged the risk of overcapacity in some areas, but have largely portrayed the criticism as overblown and hypocritical, coming from countries that are also ramping up clean energy subsidies.
(Updates with additional Georgieva comments from eighth paragraph.)
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