上向く世界経済 本格再生へ「分水嶺」の1年だ

The Yomiuri Shimbun January 3, 2014
Steady leadership needed as world economy at crossroads
上向く世界経済 本格再生へ「分水嶺」の1年だ(1月3日付・読売社説)


Signs of a bright future for the global economy seem to have begun twinkling, with advanced economies picking up gradually after managing to break out of monetary and fiscal crises.

Uncertainties remain, however, concerning the policy handling of the United States and European countries. Caution is also needed regarding a slowdown of emerging market economies such as China.

This year will most likely mark a watershed regarding whether the world economy can realize sufficiently robust growth to get onto a full-fledged recovery path.

In its report last autumn, the International Monetary Fund forecast the 2014 world economy would log 3.6 percent growth after inflation. It is noteworthy that the growth of the world economy this year is expected to expand a little on the strength of advanced economies’ pickup, compared to 2013’s growth, which the IMF estimates at 2.9 percent.

U.S. debt ceiling accord a key

The world financial woes triggered by the Lehman Brothers bankruptcy in the autumn of 2008 embroiled Greece, developing into a crisis for all European economies.

What made it possible for the global economy to begin finding a way out of a chain of negative occurrences at long last was, first of all, indications of a solid business recovery in the United States, the epicenter of the global financial hardships. The European economies, after experiencing a series of business downturns, have now returned to positive growth, signifying a breakaway from the worst phase of their economic conditions.

Symbolic of the signs of uptrend is the decision late last year by the U.S. Federal Reserve Board to modify its extraordinary easy money policy in response to improvements in U.S. unemployment rates and other key economic indicators.

Starting this month, the Fed is scheduled to embark on an “exit strategy” designed to scale down bit by bit Phase Three of its quantitative monetary easing, or QE3, in which the U.S. central bank has been purchasing a huge amount of U.S. treasury bonds and other financial assets every month.

It seems the world’s market players have been reassured to see the Fed spearheading a move in favor of an exit strategy, amid large-scale monetary easing policies in place in Japan, the United States and Europe. Consequently, stock prices are on the rise in New York and other markets.

The Fed reportedly intends to continue tapering its QE3 asset purchases, with a view to terminating the easy money policy as early as the end of the year. Next year and afterward, the Fed is seen probing timing for an end to its zero-interest rate policy while looking for an opportune time to raise rates.

Due attention should be paid to the adverse impact of colossal money supplies worldwide that have so far been in place, as they could lead to rekindling of economic bubbles in the United States, emerging market countries and elsewhere.

Implementation of the exit strategy, however, will require a considerably long period of time. The ability of incoming Fed chair Janet Yellen, who is to take the place of Chairman Ben Bernanke toward the end of January, will certainly be tested through her efforts to ensure that no danger arises of the world economy and markets plunging into turmoil in the process of the implementation of the Fed’s exit strategy.

How things evolve regarding U.S. congressional discussions on fiscal measures is also of key significance.

It is a highly welcome development that Democrats and Republicans in Congress have reached common ground on a federal budget deal, successfully averting a recurrence of a partial shutdown of government functions.

Should the two parties fail to strike an agreement on raising the federal government’s debt ceiling in time for the Feb. 7 deadline, however, there would be a high risk of U.S. treasury bonds going into default. If U.S. treasury bonds actually went into default, there would be serious damage to not only the United States but also the rest of the world economy.

Therefore, it was reasonable for U.S. President Barack Obama to ask Republican Party members in Congress to unconditionally approve raising the debt ceiling. The confrontation between the Democrats and Republicans is expected to continue ahead of midterm elections in November, but an early agreement on the matter is needed.

The European Central Bank carried out an additional interest rate cut in November despite having been able to stem the business slowdown because it was wary about prices hovering at low levels.

Europe must avoid deflation

The growth rate in consumer prices has been held to less than 1 percent, lower than the 2 percent targeted by the ECB. There is concern that Europe will fall into deflation like Japan.

If Europe’s favorable economic turn should prove to be a “false dawn,” it will hobble the world economy again.

The ECB should not hesitate to take the next steps, including an additional interest rate cut. Deflation must be avoided while keeping a close watch on price and business trends at the same time.

ECB stress tests on eurozone banks will start shortly ahead of its integrated supervision of the banks starting this autumn.

It is indispensable to promote the strengthening of the financial underpinnings of banks with capital shortages to prevent financial uncertainty from flaring up again.

The pace of growth has been slowing down across the board in emerging economies. Difficult economic management is expected to continue in China, and the country is likely to see a growth rate of about 7.5 percent this year, unlike the double-digit growth it once marked.

In China, nonbanks and other financial institutions have collected funds from individuals by selling high-interest financial products. These funds have been used to promote public works projects and real estate development in regional areas. It is problematic that the real situation of such shadow banking remains unknown.

Shadow banking problematic

Investment firms under the umbrella of Chinese local governments have a huge amount of debts. It is vital to prevent a situation in which the Chinese financial system is shaken by deferred debt repayment.

How can China break away from an investment-dependent economy and achieve a soft landing for stable growth? Correcting economic disparities is also a tough challenge. China should accelerate reform.

Due to the U.S. “exit strategy” of scaling down quantitative monetary easing, investment money has been withdrawn from Brazil and India among other countries, and there is now a real possibility of a vicious circle in which the weakening of their currencies leads to the stagnation of their real economies.

As it has become an urgent task to rein in high prices, central banks of various countries have been tightening their money supply.

To broaden the vision of the world economy, now lighted by a faint hope, advanced and emerging economies must overcome their own challenges and promote policy coordination.

(From The Yomiuri Shimbun, Jan. 3, 2014)
(2014年1月3日01時38分 読売新聞)

by kiyoshimat | 2014-01-05 08:15 | 英字新聞

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