Uncertainty has become the new normal as climate change calamities and sporadic disease outbreaks such as the coronavirus in China cause supply chain disruption and restrictions to travel and tourism, International Monetary Fund (IMF) executive Kristalina Georgieva says.
Writing at a time when the finance ministers and central bank governors from the world’s Group of 20 industrialised countries meet in Riyadh ahead of the G20 Summit later this year, the IMF’s managing director identified trade, climate change and inequality as burning topics deserving of urgent discussion to drive global growth.
Pointing out that the world’s leading countries – of which South Africa is a member despite consistently underperforming – “were facing an uncertain future”, Georgieva added that initial steps between the US and China towards rapprochement were adding flickers of hope to global economic activity.
The anticipated slow curve-crawl upwards, from 2.9% last year to 3.3% this year and 3.4% by 2021, was also largely dependent on emerging market economies, Georgieva said.
That contribution from developing G20 leaders will most likely come from countries such as Turkey, India and China, whose economies are decidedly more robust than South Africa’s, where Statistics SA a few days ago put the country’s expected growth rate at 0.7%, down from 1.0% at the beginning of the year.
The steady lift from economic torpor, however slight, is in large part also attributable to monetary restructuring and has added 0.5% to growth prospects over the next few months, Georgieva says.
The combined effort to ease financial strain, she adds, meant “49 central banks cut rates 71 times as part of the most synchronised monetary action since the global financial crisis”.
South African finance minister Tito Mboweni would be well advised to regard Georgieva’s sentiments seriously as they show what can be accomplished if due fiscal restructuring is implemented, especially since he’s about to deliver the most important budget speech in recent times of Africa’s only G20 member.
As for the coronavirus, given how it has unexpectedly put China to the sword, Georgieva said it was being properly managed – for now.
However, should it develop into an out-of-control pandemic, which remains a real risk, its effects could ripple out across industry, eroding early gains made in galvanised efforts to stimulate trade.
Management of the tariff tension between the US and China could also be stepped up, now that a strong foundation has been laid through phase-one talks between Washington and Beijing, Georgieva argues.
Such is the fallout of the ongoing trade rift between the two countries that it has resulted in a loss of a $100 billion to the world economy, despite the implementation of provisions to stem the blood-letting.
The effect of sudden severe weather events on countries where infrastructure is destroyed with enduring consequences for populations already straining against rising inequality, such as last year’s Cyclone Idai in northern Mozambique, further raises the need for global leaders to urgently look at trade, climate, and lack of equitable prosperity, Georgieva writes.
She subsequently emphasises that it’s also one of the reasons why unnecessary uncertainties, usually triggered by geopolitical knee-jerking, are best avoided at a time when the world economy is on rickety legs. – Eugene Goddard