Bali: The International Monetary Fund (IMF) and World Bank ended its annual conference in the Indonesian resort island of Bali last week.
The annual meeting of global finance ministers and central bank governors took place between October 12th to the 14th. Early arrivals were given a scare by a 6.0 magnitude earthquake on October 10th, which caused alarm but no serious damage in the conference area at Nusa Dua.
During the event, discussions covered the challenges facing the global economy, including international trade frictions, future fiscal and monetary policy, development and the need for greater collaboration amongst countries to boost global trade. Developing countries whose economies are engulfed in the “emerging market meltdown” led the call for the leading economies to curb rising trade tensions to stem volatility caused by protectionist policies as well as moderating the pace of monetary policy “normalisation” which is affecting them adversely.
Also of importance to many participants is the ongoing tit-for-tat trade war between the United States and China.
China’s central bank governor, Yi Gang said that protectionism and trade stand-offs are major risks for the world economy. He further added that China stands ready to cooperate with everyone to support free trade and investments, and that it would benefit all nations should they jointly take measures against trade protectionism, strive to make economic globalisation more open, more inclusive and balanced.
US Treasury Secretary Steven Mnuchin downplayed the level of alarm caused by the US decision to impose trade tariffs on China and other countries. He stated that he is not concerned about the possibility that China might step up its sale of US treasuries in retaliation for the pressure from Washington to alter national economic strategies aimed at helping Chinese companies catch-up in advanced technologies. With regards to the ongoing dispute with China, he said that they are not about buying more US goods and commodities like liquified natural gas or soybeans. They are about “structural issues” and meaningful commitments to create a rebalanced trading relationship.
In a press briefing, IMF Managing Director, Christine Lagarde said that the Bali meetings have renewed importance of multilateral coordination that is “more inclusive, more people-centred and more results-oriented.” She also urged delegates to de-escalate trade tensions by having open dialogue and finding new ways to fix global trade rules. She also warned policy makers to build adequate monetary and fiscal buffers as they brace themselves for more market volatility, against the backdrop of continued financial tightening and uncertainties in the global economy triggered by trade disputes.
In addition, Ms Lagarde said that while global economic growth is strong, it has plateaued and that downside risks are on the horizon. She further called for countries to develop a system fit for purpose to tackle the 21st century challenges of such as inequality, technology and sustainability.
IMF Chief Economist Maurice Obstfeld noted that the increasing use of tariffs by the two major powers was influencing medium-term views on the global economy’s health. “Notwithstanding the present demand momentum, we have downgraded our 2019 US growth forecast owing to the recent enacted tariffs on a wide range of imports from China and China’s retaliation.”
Before the meetings started, the IMF had downgraded its 2018 estimate for global growth to 3.7 percent from an earlier forecast of 3.9 percent.
Specifically, in the Asia-Pacific, challenges are posed by the current trade disputes, demographic changes like an aging population in some Asian countries and upheavals caused by an increasing digital regional and global economy.
The International and Monetary Financial Committee (IMFC), which advises the Washington-based IMF’s board of governors, issued a communique urging countries to keep debt under control, engineer policies to ensure credit is available in line with their level of inflation and ensure sustained economic growth for the benefit of all. It also affirmed the value of addressing trade tensions and improving the existing system. “We recognise the need to continue to step up dialogue and actions to mitigate risks and enhance confidence in international trade . We acknowledge that free, fair and mutually beneficial goods and services trade and investments are key engines for growth and job creation.”
The IMFC communique further added that although global expansion remains strong, projections suggests that recovery is increasingly uneven, and some of the previously identified risks have partially materialised. Policy uncertainty, historical high debt levels, rising financial vulnerabilities, and limited policy space could further undermine confidence and growth prospects.
World Bank President Jim Yong Kim urged countries to stand together and embrace unity amid ongoing woes in global economies. While a resolution of short-term problems in trade has yet to be seen, he said that he had observed a spirit of solidarity among delegates during the meetings to prepare for the longer term.
Officials from many participating countries expressed hope that the momentum from the meetings could help ease tensions between the world’s biggest economies.
IMF members also pledged to avoid devaluing currencies to seek a trade advantage by making a country’s exports relatively cheaper.
On its part, host Indonesia, besides gaining in its international standing for the successful hosting of the event, also managed to secure a broad spectrum of deals in infrastructure investments and monetary cooperation. It also secured assistance from the World Bank and Asian Development Bank for disaster recovery and mitigation in Lombok and Central Sulawesi which suffered from recent earthquakes and tsunamis.
The meetings brought welcome economic activity to Bali which is in the middle of a downturn with economic growth in 2017 at 5.6 percent due the eruption of Mount Agung – its slowest rate in six years. It hopes the meeting will raise economic activity to 6.25 percent this year.
In total, the meeting drew 36,669 delegates from around the world. Besides finance ministers and central bankers from the 189 member countries, participants also included those from the private sector, the banking community, academia, civil society organisations and observers and roughly 1,000 media representatives.
The next two annual gatherings will be held in Washington with Morocco hosting the 2021 event.