Indonesian President Joko Widodo yesterday urged global central bankers and finance ministers to guard against growing risks facing the world’s economy, as a heated a Sino-US trade war roils both emerging and developed markets.
At the plenary session of the IMF and World Bank meetings being hosted by Indonesia, Widodo peppered his speech with references to the HBO series Game of Thrones, where families and kingdoms battle for power in a fictional continent, to explain risks facing the global economy.
“All these troubles in the world economy, are enough to make us feel like saying: ‘Winter is coming,’” he said, using a phrase that characters in the popular fantasy series often use to refer to the lurking threats that could destroy them.
Photo: Reuters
The meetings, attended by more than 19,000 delegates and other guests, including ministers, central bank heads and some leaders, come at a time of renewed tumult in global financial markets as investors dumped hundreds of billions of dollars of equities from Wall Street to European and Asian bourses.
The fear is that the US-China trade row could upend global supply chains, and chill international trade and investment — a risk underscored by Widodo.
With growing rivalry in the world economy, “the situation could be more critical compared to the global financial crisis 10 years ago,” he said.
He did not single out any one country, but emerging markets, like Indonesia, have been battered by stormy conditions amid worries about the impact of an escalating Sino-US trade war and monetary policy tightening in advanced economies.
The market ructions have now cascaded through to developed markets, with Wall Street extending a slide into a sixth session on Thursday amid the trade war fears.
“Lately it feels like the relations among the major economies are becoming more and more like Game of Thrones,” Widodo said. “Are we so busy fighting with each other and competing against each other that we fail to notice the things which are increasingly threatening, all of us alike, rich and poor, large and small?”
Earlier this week, the IMF cut its global economic growth forecasts for both this year and next to 3.7 percent, from 3.9 percent in its July forecast, saying that the trade war was taking a toll and emerging markets were struggling with tighter liquidity and capital outflows.
Separately, on Thursday, the IMF said in its twice-yearly report on the Asia-Pacific region that the market rout seen in emerging economies could worsen if the US Federal Reserve and other major central banks tightened monetary policy more quickly than expected.
IMF managing director Christine Lagarde estimated that the escalation of current trade tensions could reduce global GDP by almost 1 percent over the next two years.
“Clearly, we need to de-escalate these disputes,” Lagarde said.
Changyong Rhee, director of the IMF’s Asia and Pacific Department, said there would be no winners in Asia from the global trade frictions, as other countries would not be able to compensate fully for supply chain disruptions in China and the US — the world’s top two economies.
“Today’s growth headwinds, from financial market tightening to trade tensions, could persist for some time,” he told a briefing on the report.
“For this reason, it will be important for policymakers to save their ammunition for when it is truly needed,” he said.
The IMF maintained its forecast that the Asian economy would expand 5.6 percent this year, but cut its projection for next year to 5.4 percent, down by 0.2 points from April.
With all these factors combined, growth in Asia could drop by up to 0.9 points over the next couple of years, the fund estimated.
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