The global economy faces serious hurdles next year, including “large-scale” unemployment in rich nations, asset bubbles and backsliding toward protectionism, the World Bank chief said yesterday.
In a sobering assessment of the fragile status of the economic recovery, Robert Zoellick outlined a list of potential pitfalls to a business forum on the sidelines of an Asia-Pacific summit.
“The reason I am flagging this issue is that we are in the stage of recovery where confidence is very important,” he said. “If you have asset bubbles that are not properly dealt with, you could again undermine confidence in 2010, which is the year I am more concerned about.”
Zoellick said that continuing high levels of unemployment, particularly in developed nations, would create “second-wave” effects for banks including defaults on consumer loans, credit cards and mortgages.
The US consumer, who has been the savior in previous downturns, can no longer be relied upon to drag the global economy out of the doldrums by returning to enthusiastic spending, he said.
“In this environment the US consumer is deleveraging, building savings. He or she is not going to play the role that they played in the past,” he said, adding that the onus was now on the developing world.
Countries like Indonesia, the Philippines and Thailand were now able to “actually borrow more if they have access to financing,” he said.
Zoellick also warned of signs that crisis-hit countries are attempting to shore up their economies by reintroducing protectionist measures.
“By and large it’s a low grade fever, it’s not a full influenza, but if you’ve got large-scale unemployment one has to be careful, because political leaders are going to be under pressure to do something and unfortunately one of the things they often are tempted to do is to raise barriers,” he said.
Ministers from the 21-member APEC forum meeting in Singapore this week have issued calls to resist protectionism ahead of a weekend summit, saying it risks reversing the region’s nascent recovery.
They have also called for massive government stimulus packages to be unwound carefully, and not withdrawn before private sector demand is strong enough to drive economic engines.
“If you look at the US stimulus program and many of the stimulus packages, a lot of the money actually comes late in 2009, the start of 2010,” Zoellick said. “The question mark for everybody is whether the private sector will kick in by the middle of 2010 and that’s part of an issue of confidence.”
The World Bank chief said that another little-mentioned risk was the specter of inflation in the Asia-Pacific region after central banks moved to “open the tap of liquidity” in the face of the crisis.
“This will be a challenge for the central banks in this region because traditionally their monetary policy has followed the Federal Reserve,” he said.
Right-wing political scientist Laura Fernandez on Sunday won Costa Rica’s presidential election by a landslide, after promising to crack down on rising violence linked to the cocaine trade. Fernandez’s nearest rival, economist Alvaro Ramos, conceded defeat as results showed the ruling party far exceeding the threshold of 40 percent needed to avoid a runoff. With 94 percent of polling stations counted, the political heir of outgoing Costa Rican President Rodrigo Chaves had captured 48.3 percent of the vote compared with Ramos’ 33.4 percent, the Supreme Electoral Tribunal said. As soon as the first results were announced, members of Fernandez’s Sovereign People’s Party
EMERGING FIELDS: The Chinese president said that the two countries would explore cooperation in green technology, the digital economy and artificial intelligence Chinese President Xi Jinping (習近平) yesterday called for an “equal and orderly multipolar world” in the face of “unilateral bullying,” in an apparent jab at the US. Xi was speaking during talks in Beijing with Uruguayan President Yamandu Orsi, the first South American leader to visit China since US special forces captured then-Venezuelan president Nicolas Maduro last month — an operation that Beijing condemned as a violation of sovereignty. Orsi follows a slew of leaders to have visited China seeking to boost ties with the world’s second-largest economy to hedge against US President Donald Trump’s increasingly unpredictable administration. “The international situation is fraught
MORE RESPONSIBILITY: Draftees would be expected to fight alongside professional soldiers, likely requiring the transformation of some training brigades into combat units The armed forces are to start incorporating new conscripts into combined arms brigades this year to enhance combat readiness, the Executive Yuan’s latest policy report said. The new policy would affect Taiwanese men entering the military for their compulsory service, which was extended to one year under reforms by then-president Tsai Ing-wen (蔡英文) in 2022. The conscripts would be trained to operate machine guns, uncrewed aerial vehicles, anti-tank guided missile launchers and Stinger air defense systems, the report said, adding that the basic training would be lengthened to eight weeks. After basic training, conscripts would be sorted into infantry battalions that would take
GROWING AMBITIONS: The scale and tempo of the operations show that the Strait has become the core theater for China to expand its security interests, the report said Chinese military aircraft incursions around Taiwan have surged nearly 15-fold over the past five years, according to a report released yesterday by the Democratic Progressive Party’s (DPP) Department of China Affairs. Sorties in the Taiwan Strait were previously irregular, totaling 380 in 2020, but have since evolved into routine operations, the report showed. “This demonstrates that the Taiwan Strait has become both the starting point and testing ground for Beijing’s expansionist ambitions,” it said. Driven by military expansionism, China is systematically pursuing actions aimed at altering the regional “status quo,” the department said, adding that Taiwan represents the most critical link in China’s
RSS