x Abu Dhabi, UAESunday 23 July 2017

UAE Central Bank chief rails against quick fixes for economic perils

The Central Bank Governor has warned short term fixes to economic problems among the advnced economies is damaging confidence.

Sultan Al Suwaidi, the UAE Central Bank Governor, has warned that short-term fixes to economic problems among advanced economies are damaging confidence.

He made his remarks on Saturday at the spring meetings of the IMF and World Bank in Washington.

"Global prospects are still hampered by the lack of clarity in advanced economies' policies where reliance has been primarily on short-term measures that do little to strengthen confidence in a durable way," said Mr Al Suwaidi.

His comments coincided with a renewed call by the IMF for leading economies to accelerate growth and introduce job-creating reforms.

Officials also warned emerging and smaller economies that they should shore up their financial defences in anticipation of turbulence as leading economies charge up growth with extraordinary monetary stimulus and low interest rates.

"The world economy still faces a crisis of confidence, as Europe still struggles with recession and its peripheral crises, and the US and Japan still lack credible plans to bring down their huge debt and deficit burdens," said Tharman Shanmugaratnam, who chairs the IMF's steering committee.

"The commodity that is in shorter supply now is confidence … Confidence needs to be strengthened by stronger predictability in medium-term fiscal policy."

The IMF managing director Christine Lagarde, in a fresh IMF policy agenda, urged Europe, the United States and Japan to act more resolutely to build up confidence in a future of sustainable growth.

"The global economy has avoided the worst, but it is by no means out of the woods, and prospects may be diverging," she said.

Mr Shanmugaratnam, Singapore's deputy prime minister, linked completing reforms in developed economies to fighting unemployment.

"Monetary policy accompanied by structural reforms that give a chance to young people to get jobs, structural reforms that help companies to upgrade and improved productivity, is much more likely to succeed," he said.

The IMF chiefs warned, meanwhile, that with advanced economies pumping out money to stimulate growth, others need to build up buffers to protect themselves from asset market bubbles and other side-effects, including the whiplash that could come when those loose monetary policies are tightened.

Some officials at the G20 talks, on the sidelines of the meetings, said the focus was mostly on Europe. Germany, which has been setting the tone of euro-zone reforms and growth efforts, has a "pragmatic" outlook, they said.

* With AFP