V. Vasiliauskas: Challenges are unavoidable, yet it’s the perfect time to gear up and meet them head-on
Firm economic recovery and still favourable financing conditions open an ideal window of opportunity to implement structural reforms and sort out public finances. This is one of the key topics that Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania, will discuss during the Spring Meetings of the International Monetary Fund (IMF) held in Washington, DC.
‘Global economy continues its firm upward climb – many countries, including Lithuania, have recorded the strongest growth momentum in the last few years. This provides for an ideal opportunity to make necessary preparations to tackle challenges that await us in the near future,’ said Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania.
According to him, in order to ensure that the income of domestic households continues to rise and edges closer to the average of advanced economies, Lithuania must boost productivity. In recent years output growth has been slacking behind labour costs. If prevails, such a trend could curb possibilities to bolster income. With population ageing and emigration still a relevant issue, labour shortage will be increasingly more pronounced. Should national policies remain essentially unchanged, labour force will see significant annual losses.
Global economy also faces a plethora of challenges, e.g. the high level of public and private debt. Over the last decade, global debt has risen by 40%, to stand at 225% of global GDP. This problem would become even more acute if interest on loans, which is currently very low, reached its long-term average, and economies, corporates and households thus faced repayment difficulties.
Downside risk to robust growth in international trade – one of the main drivers of economic expansion – comes from increased protectionism and potential trade wars. International trade barriers may hinder global supply chains, limit the supply of goods and increase their prices, as well as slow down technological advances, thus putting the brakes on investment and productivity growth.
According to the latest IMF projections, global growth is expected to rise to 3.9% in both 2018 and 2019, the strongest expansion since 2011. Lithuania’s economy will see similar growth momentum – in 2018 it is projected to expand by 3.2%.
The Chairman of the Board of the Bank of Lithuania is a member of the Board of Governors of the IMF. Twice a year he participates in meetings organised by the IMF, where governors of central banks as well as Finance Ministers discuss relevant economic issues and look for ways to accelerate economic growth. During his visit to Washington, DC, Mr Vasiliauskas will also meet with the representatives from the US Department of the Treasury, IMF Mission Chiefs for the euro area and Belarus, and the Governor of the National Bank of Ukraine.