The IMF urged governments to cut public debt to prevent higher interest rates and slower economic growth, saying the fiscal crisis in Europe shows such risk “cannot be ignored.”
Debt in developed economies will expand to about 110 percent of GDP by 2015, from 73 percent in 2007, the IMF said in a fiscal review released on Friday.
For the G7 countries, the ratio is the highest since World War II, it said.
“As economic conditions improve, the attention of policy makers should now turn to ensuring that doubts about fiscal solvency do not become the cause of a new loss of confidence: recent developments in Europe have clearly indicated that this risk cannot be ignored ... Major fiscal consolidation will be needed over the years ahead,” the IMF said.
LONG-TERM INTEREST
If developed economies choose only to stabilize debt at its 2015 level, long-term interest rates may climb by 2 percentage points and potential growth may be 0.5 percentage point lower annually, the IMF predicted. That, in turn, would raise borrowing costs in emerging countries, it said.
The forecasts don’t take into account new measures announced by Portugal and Spain this week to trim their deficits, which go “in the right direction, are important steps,” Carlo Cottarelli, head of the IMF’s fiscal affairs department, said on Friday at a press conference in Washington.
The IMF, which is contributing 30 billion euros to a 110 billion-euro (US$136 billion) bailout for Greece, said that policy makers need to provide more details about how they plan to reduce their budget deficits.
‘URGENT’
“It is now urgent to start putting in place measures to ensure that the increase in the deficits and debts resulting from the crisis, mostly from the loss of output and revenues, does not lead to fiscal sustainability problems,” IMF Managing Director Dominique Strauss-Kahn said in an introduction to the report.
“In many countries, fiscal adjustment will require a sizeable, and sometimes unprecedented, effort,” he said.
The Washington-based IMF predicted budget deficits in advanced economies would narrow by 0.4 percentage points to an average of 8.4 percent of GDP relative to last year, though it said this reduction mainly reflected falling support for the financial industry in the US.
The US will post the third-largest budget deficit among advanced economies this year at 11 percent of GDP, behind the UK’s 11.4 percent and Ireland’s 12.2 percent, the IMF predicted.
3.8 PERCENT SURPLUS
To bring debt back below 60 percent of GDP by 2030 — the level before the financial crisis of 2008 — advanced economies would need to bring their budget balances excluding debt payments to a surplus of 3.8 percent of GDP by 2020, from a deficit of 4.9 percent of GDP this year, the IMF estimated.
“The task is even more difficult than it appears” because many countries will need to increase spending on health care and pensions over the next 20 years, the IMF said.
Pushing back the retirement age and improving cost containment in health care are some of the measures being touted as necessary to support fiscal adjustment, the IMF said. Countries with a very large gap may have to increase targeted taxes, including eliminating below-standard sales taxes rates and increasing levies on tobacco and alcohol, the IMF said.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day