Interview: IMF chief economist calls for better multilateralism amid broad-based global slowdown

Source: Xinhua| 2019-04-15 18:53:04|Editor: xuxin
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WASHINGTON, April 14 (Xinhua) -- Gita Gopinath, chief economist of the International Monetary Fund (IMF), has called for a "better multilateralism" to strengthen international cooperation, as the global economy is experiencing a broad-based slowdown with a prospect of a "precarious" rebound.

"I think this is true for all international institutions with the concerns about what's happening with world cooperation with multilateralism," Gopinath told Xinhua in a recent interview on the sidelines of the spring meetings of the World Bank and the IMF in Washington.

"The retreat from globalization, the rise in protectionism is clearly one of the major trends of our times, which is a reversal from the past," Gopinath said, adding that "this is a matter of great concern" for this year's spring meetings.

The IMF chief economist underscored the need for countries to continue engaging with each other in the pursuit for cooperative solutions "to make this a better multilateralism."

"I don't see an alternative to a multilateral work," she said, noting that many important issues, such as trade, climate change, cyber security and international taxation, all require that countries cooperate and come up with joint solutions.

The IMF on Tuesday lowered its global growth forecast for 2019 to 3.3 percent in its latest World Economic Outlook (WEO) report, down 0.2 percentage point from its estimation in January, signaling a broad-based slowdown.

"The second half of 2018 was particularly weak for many parts of the world economy and that weakness carries over into the first half of 2019," Gopinath said, expecting some recovery of the global economy in the second half of 2019 and a further rebound in 2020.

"The recovery (of the global economy) will come from recovery in emerging and developing economies" such as Argentina and Turkey, she said, adding such recovery remains "somewhat precarious" with serious downside risks.

While there has been an improvement in U.S.-China trade talks over the last few months, trade tensions remain the biggest downside risk to the global economic expansion, said Gopinath.

"We might see tensions in other sectors, the auto sector, and that would then start affecting many more countries in the world and a bigger part of the global supply chain," she said. "That is a very important risk for us going forward."

In February, the U.S. Commerce Department submitted a report to the White House on whether to impose tariffs on imported cars and auto parts on national security grounds, drawing backlash from auto makers, suppliers and industry groups.

U.S. President Donald Trump has 90 days to decide whether to adopt the Commerce Department's recommendations and introduce tariffs on imported vehicles and auto parts.

Speaking of China, Gopinath praised what the Chinese government has been doing to pivot away from high-speed growth to high-quality growth, noting that such a shift would require moving away from credit-driven, investment-driven growth toward more consumption-driven growth.

The IMF chief economist suggested China continue well-contained deleveraging in the process so that the economy slows down at a proper pace.

China has used a combination of monetary policy tools and fiscal stimulus in the wake of the economic slowdown, and there have been signs of recovery, Gopinath said. She cited the rise of the Manufacturing Purchasing Managers' Index (PMI) in March as an example.

The IMF revised up the 2019 growth projection for China to 6.3 percent, up 0.1 percentage point from its previous estimation in January, according to the WEO.

In Gopinath's view, the international use of the Chinese currency renminbi (RMB) or yuan will rise over time as the Chinese economy becomes larger.

"As countries get larger and become more prominent in the world economy, they start seeing more of a global currency role," she said.

However, there is still a long way to go before the RMB becomes a dominant global reserve currency, she said, adding that this would require very sound financial institutions, a predictable policy on the monetary side, as well as RMB-denominated assets that the world views as safe assets.

"The solutions for that are the same as what's required to try to continue to grow and become an even larger economy," said the IMF chief economist, suggesting China focus more on pivoting toward markets and improving macro policy frameworks.