Opening Remarks at the 2017 IMF-JICA Conference
IMF News, February 2, 2017
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- Published: February 2, 2017
Global and Regional Outlook and Risks
- Global growth in 2016 reached 3.1 percent.
- Global economic activity is projected to pick up to 3.4 percent in 2017, and 3.6 in 2018.
- US growth projections: 2.3 percent in 2017 and 2.5 in 2018 (mark-up reflecting assumed near-term fiscal stimulus).
- Emerging market economies’ growth is projected in 2017 at 4.5 percent.
- Asia’s GDP growth is estimated at 5.2 percent in 2016, increasing to 5.3 in 2017 and 2018.
- Revisions and drivers:
- China: growth projections revised up on the expectation of continued fiscal policy support.
- Japan: growth revised up due to stronger-than-expected performance in H2 2016.
- India: projected to grow well over 7 percent a year over the medium term (noting short-run effects from recent monetary reform).
- ASEAN: growth revised down in Indonesia (weaker private investment) and Thailand (temporary slowdown in consumption and tourism).
- Singapore: recent activity bodes well for 2017 as an indicator of trade developments.
- Malaysia, Philippines, Vietnam and other emerging and developing economies: growth robust and revised up, driven generally by domestic demand.
- Downside risks highlighted:
- Financial conditions in Asia tightened after the US election; currencies depreciated against the dollar; capital inflows reversed.
- Rising protectionism in advanced economies could affect Asia’s prosperity.
- Uncertainties could contribute to financial volatility in the coming months.
- China’s reliance on policy stimulus sustains near-term growth but contributes to a continued rise in the credit to GDP ratio.
- Upside risks noted:
- Ongoing rebalancing of China’s economy toward consumption and services.
- Higher energy prices benefiting Asian commodity producers.
- Policy measures recommended for volatility management:
- Flexible exchange rates.
- Timely use of macro-prudential policies.
- Stronger reserves buffers.
Asia’s Development Record and the SDG Challenge
- Poverty reduction and social progress:
- Number of Asians living in extreme poverty fell from almost two billion in 1990 to around 800 million in 2015.
- Largest decline in China; significant gains in South-East and South Asia.
- School enrollments have risen.
- Gender equality indicators have improved; maternal health has improved.
- Child mortality rates have fallen; progress made combatting HIV/AIDS, malaria and other diseases.
- The SDGs framework:
- Introduced in 2015; comprehensive; emphasizes environmental and resource sustainability.
- Covers three key areas: economic development, social inclusion, and governance.
- Unlike the MDGs, the SDGs are relevant for countries at all stages of development.
- Areas of concern where Asia may fall behind if trends are not reversed:
- Reducing waste.
- Combating climate change.
- Protecting marine environments.
- Regional outlook on SDG progress:
- Asia and the Pacific expected to do very well on SDG goals for development, including poverty reduction, water and sanitation, energy and growth, conditional on current trends.
Pro-Growth Fiscal Policy, Fiscal Risks, and Fiscal Space
- Core premise:
- Pro-growth fiscal policy is essential and often involves scaling up development spending.
- Scaling up spending is feasible only if a government has fiscal space to raise spending without endangering market access or debt sustainability.
- Meeting the SDGs will require:
- Improved access to finance.
- An enhanced role for the private sector in infrastructure delivery.
- Fiscal risk management:
- Since the Great Recession, awareness has grown of the need for comprehensive analysis and management of fiscal risks to ensure sustainable public finances and macroeconomic stability.
- Many developing countries generally have weak capacity in fiscal risk management, including for risks from natural disaster and climate change.
- Efforts to improve monitoring and management of fiscal risks are important to help policymakers assess financing needs and preserve fiscal space.
Policy Implications and the Role of the IMF
- Fiscal policy and reform priorities:
- Prudent fiscal policies and fiscal reforms (examples cited: Malaysia and Indonesia).
- Reforms include measures to broaden the revenue base, diversify away from volatile energy revenues, and reduce inefficient fuel subsidies.
- Domestic revenue mobilization is extremely important.
- Need to better prioritize spending and public service delivery.
- Social safety nets should protect the vulnerable while aiming to achieve goals at a reasonable cost.
- Strengthening public investment management can help close infrastructure gaps and sustain long-term growth.
- IMF support and instruments:
- Development of analytical tools to build capacity in these areas.
- Diagnostic tools provided to improve tax administration in many countries.
- Use of Fiscal Transparency Evaluations and Public Investment Management Assessments to strengthen institutions.
- Policy advice tailored to individual countries’ needs.
- Training and technical assistance activities via regional technical assistance and training centers.
- Country examples:
- Lao PDR and Cambodia: IMF policy analysis and advice concentrated on identifying and mitigating macro-financial risks to ensure sustainable growth and promoting economic diversification and inclusiveness.
- Technical assistance focusing on resource mobilization, financial market development and statistics.
- Goal of conference exchange:
- Identify fiscal strategies to monitor and minimize fiscal risks and create fiscal space to support meeting the SDGs.
Key Statistics and Exact Figures
- "3.1 percent" — global growth in 2016.
- "3.4 percent" — projected global growth in 2017.
- "3.6" — projected global growth in 2018 (presented without the word "percent" in source; preserved placement in context).
- "2.3 percent" — US growth in 2017 (current forecast assumption).
- "2.5" — US growth in 2018 (presented without the word "percent" in source; preserved placement in context).
- "4.5 percent" — emerging market economies’ projected growth in 2017.
- "5.2 percent" — Asia’s GDP growth estimated in 2016.
- "5.3" — Asia’s GDP growth projected in 2017 and 2018 (presented without the word "percent" in source; preserved placement in context).
- "well over 7 percent a year" — India’s medium-term growth projection.
- Poverty figures: "almost two billion" in 1990 to "around 800 million" in 2015.
Opening Remarks at the 2017 IMF-JICA Conference