V. Vasiliauskas: Global economy under influence of whole complex of negative factors — response must be complex as well
Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania, is going to visit Washington, D.C. to attend annual meetings of the International Monetary Fund (IMF). At these meetings, heads of central banks and finance ministers will seek consensus on coordinated action to reduce new threats arising to global economic development and to stir economic growth.
‘Global economic development has not brought any pleasant surprises. Conversely, there are even less signs of optimism, as the results of a number of countries appear to be below expectations, and the adjusted growth projections — worse than those published in spring,’ said Vasiliauskas, summarising the Global Economic Review presented on the eve of the meeting. He drew attention that ‘unlike in previous years, this time, the challenges faced by advanced countries rather than developing regions are “more to blame” for the deteriorated projections’.
The IMF Review cut the growth prospect for advanced countries by 0.3 p.p. compared to the April forecasts. The growth projections for developing countries were increased by 0.1 p. p.
The growth projection for Lithuania was reduced by 0.1 p. p. Nevertheless, our economy is expected to grow by 2.6 per cent this year — the fastest rate among the three Baltic States.
According to the estimate of the head of the Bank of Lithuania, growth in the group of advanced countries continues to be suppressed by still-subdued investment, the insufficiently effective use of labour market resources and the available manufacturing potential, as well as rooted structural issues. And yet the most significant negative effects on the forecasts for this group of countries stemmed from deceleration in US economic growth and the uncertainty surrounding the economic relationship between the United Kingdom and the EU, which may become long-term.
Mr Vasiliauskas noted that the economic expectations have also been lowered and, obviously, a negative impact on the real economy and the financial sector has been exerted by the growing threat of protectionism, as well as the strengthened sentiments of disintegration in Europe.
‘Right now, when the seizing engine of the economy needs help and a completely favourable environment, its functioning is being hindered by a whole complex of negative factors; hence it is obvious that the response to them should be a complex one,’ noted Mr Vasiliauskas, who will participate in the IMF discussions. He is convinced that the IMF, in the coming years, will have to undertake the particularly active role of coordinator in ensuring that countries immediately start implementing recommendations and jointly assumed liabilities that would ensure free trade, strengthen the banking sector and public finances, provide the necessary momentum for economic development and restore confidence in the capabilities of states and institutions to implement their decisions.
Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania, is a member of the Board of Governors of the IMF. During his visit in Washington, he will attend meetings of the IMF’s International Monetary and Financial Committee, the Nordic-Baltic constituency, and the consultancy group G30. Meetings with Tao Zhang, Deputy Managing Director at the IMF, Mahmood Pradhan, IMF mission chief for the euro area, Martin Cihak, head of the IMF and World Bank programme to assess Sweden’s financial sector, governors of the central banks of Ukraine, Moldova and Iceland have also been planned.