Central Bankers See Flat 2020 With Tilt Towards Downside
Senior officials at various central banks spoke about this year's global economy at the recent Asian Financial Forum 2020, projecting a flat growth trajectory with potential downside risks.
Speaking on Asia, Martin Raiser, country director for China and Mongolia, and director for Korea at World Bank Group, shared their projection of a moderate slowdown in the region to 5.7 percent, driven primarily by China. Within the region, some acceleration is expected from the likes of Indonesia, Philippines and Thailand. But against this backdrop, he underlined the risk of an uncertain trade environment, especially to a region so heavily reliant on trading.
«For trade uncertainty to be overcome, we would like to see underlying structural issues be addressed on a more permanent basis to provide upside risk to our forecast,» he explained at a panel discussion during this week’s AFF 2020, adding that the World Bank’s outlook for the year is titled «Fragile, Handle with Care».
And on the downside, Raiser highlighted numerous risks including the resumption of trade tensions coupled with credit concerns in the U.S. and China, noting that risk was «tilted to the downside».
Europe
«Global headwinds are expected to wane. Euro area exports will benefit from a gradual recovery in foreign demand,» said Burkhard Balz, member of the executive board at Deutsche Bundesbank, projecting a 1.1 percent growth rate for the region. «Unemployment, relatively robust growth and wages, favorable financing conditions, multiple fiscal easing should also support Euro area internal growth in the upcoming year.»
Balz echoed Raiser’s statement that risk was «tilted to the downside» as well as other prevailing hurdles but placed emphasis on monetary policy. Although he supported European Central Bank's recent decision to maintain an accommodate stance in December for price stability, he stressed that the world could «not ignore that a prolonged accommodative policy can have unintended side effects».
«Economic policy should be the first line of defense,» he added. «We cannot be overconfident in monetary policy.»
Oil
Unsurprisingly, the presence of a Russian central banker yielded interest in oil prices which have generated considerable interest in light of recently heightened U.S.-Iran tensions. According to Sergey Shvetsov, Bank of Russia’s first deputy governor, there is expected to be limited impact from the conflicts and prices overall are not projected to experience signifiant rise.
«Iran is not a question for oil prices. It can be easily substituted by other OPEC countries,» Shvetsov said. «I don’t know how the tension will develop but if other Gulf members like Saudi Arabia get involved, it will be different. [But the conflict] will not be widened. It should be a local problem.»
