Economists Pulse The World Economy

This week, the International Monetary Fund (IMF) and the world bank annual meeting were held in Washington, D.C., the two big bodies and many economists jointly "pulse" the world economy.

Although the financial crisis has been in the past six years, the major bodies and economists of this conference are still not optimistic about the prospects for the recovery of the world economy, and generally believe that the world economy will continue to move forward slowly on the road of risk recovery.

The International Monetary Fund (IMF) released the latest world economic outlook report on 7, predicting that the global economy will grow by 3.3% this year, 0.1 percentage points lower than its forecast in July. This is also the third time that IMF has expected to lower global economic growth this year.

The growth rate of the developed economies has dropped to 1.8% and 2.3% in the next two years. The euro area economy has dropped to 2.2% and 3.1% in the next two years. Japan's economic growth rate has dropped to 0.9% and 0.8% in the next two years.

The growth rate of emerging markets and developing countries has dropped to 4.4% and 5% respectively this year and next.

The group also lowered its forecast for global growth in 2015 to 3.8%.

Data downgrades show that the outlook for global economic growth is not optimistic.

Kaushik Basu, chief economist and senior vice president of the world bank, said that after a brief recovery last year, there were some recent signs of danger, facing a risk of growth stagnation again.

In the short term, the deterioration of the geopolitical situation and the aggravation of financial market turbulence in the low interest rate environment will bring short-term risks to the world economy.

Olivier Blanchard, chief economist at IMF, said that some countries are still digesting high debt and high unemployment rates.

Follow up effect.

But from a long-term perspective, there is a deeper reason for the sluggish growth of the global economy.

First of all, the aging of labor force has become a severe problem faced by developed countries and emerging economies including China.

Blanchard said that the aging of the labour force is an important reason for the potential decline of the world economy.

Second, structural changes in the global labour market also make employment problems, especially in developed countries, more serious.

For example, "you can sit in an office in Beijing, work for an American company, or work for a European or an Australian company in Manila or Mumbai," she said. This structural change is one of the factors leading to the risk since the 2007 financial crisis.

This makes developed countries face more severe employment problems than developing countries.

Take the United States as an example, despite the recent performance of US employment data, the size of the long-term unemployed has remained high, which has become a potential weakness in the US economy.

Again,

Weak growth in labour productivity has curbed potential output growth.

According to IMF statistics, the average potential growth rate in the 2003-2008 years is close to 4.5%, 2010-2013 to 3% to 3.5%, and may be lower in 2014-2018 years.

Lin Jianhai, Secretary General of IMF, said that without major technological and productivity breakthroughs, the potential growth rate would decrease.

Therefore,

The report warns that the new and old contradictions in the world economy are intertwined and the recovery situation is disappointing, and the risk of economic downfall is increasing. Most economies still need to "keep growth" as a top priority.

Under such circumstances, the loose monetary policy commonly adopted by various countries is facing a dilemma.

On the one hand, the global economic recovery still depends to a large extent on the support of the loose monetary policy of developed economies. The long term monetary policy will help stimulate consumption and increase investment.

On the other hand, it has also contributed to excessive risk-taking in financial markets, resulting in the simultaneous rise of asset prices in different countries. Apart from the fundamentals of the economy, market volatility has also dropped to a historical low. This shows that investors are too complacent, which will increase the risk of financial stability and undermine the possibility of global economic recovery.