World economic leaders tackle slow
Lima, October 7
Kick-starting the sluggish global economy and funding the climate-change fight top the agenda this week as finance ministers and central bank chiefs from around the world gather in Peru.
Setting the stage for the annual meetings of the International Monetary Fund (IMF) and the World Bank, the IMF cut its 2015 growth forecast for the world economy on Tuesday to 3.1 per cent, predicting the worst year since the global recession of 2009.
The downward revision will provide a gloomy backdrop as economic policymakers from 188 countries meet in the Peruvian capital Lima from Friday to Sunday.
“The holy grail of robust and synchronised global expansion remains elusive,” said the IMF’s new Chief Economist, Maurice Obstfeld, warning that China’s slowdown and the resulting slide in commodity prices was weighing down the world economy.
There is ‘reason to be concerned’, IMF Managing Director Christine Lagarde warned in the run-up to the meeting.
After decades of break-neck expansion, the world’s second-largest economy is set to slow to 6.3 per cent growth next year, its lowest rate in 25 years, the IMF predicted.
And that is taking a heavy toll on other emerging markets, which had grown to depend on China’s voracious appetite for their fuel, metals, minerals and other commodities.
The emerging markets, which drove global growth during the crisis of 2008-2009, are also hurting because their capital inflows are drying up as a recovering United States prepares to tighten monetary policy.
The gloomy outlook tempers the good news last weekend from the World Bank, which reported that extreme poverty will fall this year to less than 10 per cent of the global population for the first time.
The economic pain is particularly acute in Latin America, which had not hosted the IMF annual meeting since the 1967 edition in Rio de Janeiro, Brazil.
The IMF forecast a recession of 0.3 per cent in Latin America this year, and regional powerhouse Brazil is facing a contraction of three per cent.
The fifth annual slowdown for the once-mighty emerging markets and the commodities plunge underpinning it will be key agenda points as finance ministers from the leading industrialised and emerging economies gather on Thursday for a G20 meeting, before issuing a statement on Friday.
An entire neighbourhood of Lima has been closed off with military checkpoints for the occasion, leaving the streets bizarrely empty in the normally traffic-jammed city and creating headaches for commuters.
The cordon will keep any protesters well away from the movers and shakers who drive the global economy.
But the latter will still get a chance to see the poverty and inequality that trouble Peru and Latin America: The windows of the National Museum, the massive concrete building hosting the meeting, afford a view of one of the slums that surround Lima.
The scene is emblematic of international charity Oxfam’s recent finding that the richest one per cent of the population in Latin America owns 41 per cent of the region’s wealth.