“Combination of Worries” Gets Attention in Davos

IMF Blog, January 28, 2011

Source details

Publication: iMFdirect
Date: January 28, 2011
Setting: World Economic Forum in Davos, Switzerland
Summary statement: “Europe’s sovereign debt crisis, fiscal challenges in advanced economies, concerns about overheating in emerging market countries, and the impact of rising food prices. These are the hot topics at this year’s World Economic Forum in Davos, Switzerland, and a clear sign of the tensions and risks as the global economy recovers.”
Mood: With the return of global growth, “the mood is certainly more optimistic than it was a year or two ago,” but important economic problems remain.

Delegates’ outlook: They “hope the worst is over, but not certain yet.”
Market focus: Markets are looking for “the success of policy programs in some countries and for further action, including on a ‘so-called comprehensive set of measures to deal with these problems in the future.’”

IMF linkage: These issues “echo many of those highlighted in recent updates of the IMF’s World Economic Outlook and Global Financial Stability Report.”
Policy imperative: Advanced economies face significant challenges in reducing their budgets over medium-term.
Recommendation: For them, “it’s time to start laying out credible plans.”

Growth vs. risks: Many emerging market countries have been growing rapidly, but face a “combination of worries.”
Specific risks listed: “the potential for rising inflation and even overheating, plus the recent run-up in food and energy prices.”

Persistent problem: Lingering global imbalances show “no sign” of letting up.
Policy desire: Policymakers want to “address the underlying issues that gave rise to these imbalances.”

iMFdirect — January 28, 2011