This weekend’s annual meetings of the International Monetary Fund and the World Bank, which brought together finance ministers and central bank governors from almost 200 countries, seem to have yielded no material changes in policy formulation at either the national or multilateral levels, and offered little to alter views on global economic prospects.
Here are the seven main takeaways from the gathering in Lima:
- The assessment of the general context is far from reassuring. In the communique of the International Monetary and Financial Committee, the high-level policy body, officials from around the world characterized global economic growth as “modest and uneven overall,” and took note of increasing uncertainty and financial volatility. They also expressed worry about weakening medium-term prospects.
- With the advanced economies doing slightly better than before, it is the emerging world that accounts for the major increase in downside risk. Many of these nations are struggling to deal with the simultaneous impact of “tighter financial conditions, slowing capital flows and currency pressures amid high private sector foreign currency indebtedness.”
- The meetings identified five priorities for securing “strong, sustainable, inclusive, job-rich, and more balanced” global expansion. The policy areas are: delivering higher growth (both immediate and potential), reducing unemployment, preserving fiscal sustainability, ensuring financial stability and supporting trade.
- Although specific requirements vary from country to country, there is a notable set of common prescriptions that apply to many — including accommodative monetary policies, “efficient social and infrastructure spending” and maintaining adequate financial buffers and prudential regulations.
- In a nod to the challenges facing the Federal Reserve in particular, officials said “careful calibration” of national responses needed to be combined with “effective communication of policy stances.”
- Recognizing the urgent need for effective global policy cooperation and coordination, officials welcomed the IMF’s efforts to make its initiatives “even more agile, integrated and member-focused” as a basis to expand the institution’s role in monitoring, informing and influencing national policies. Moreover, given the unsettling downside risks to economic well-being and financial stability, officials are planning a “stocktaking of the international monetary system, including a review of the adequacy of the global financial safety net architecture.”
- Finally, officials again called on the U.S. to ratify the modest reforms of the IMF’s representation and governance that were agreed upon in 2010. That call is likely to continue to go unheeded given the dysfunction in Congress.
In sum, days of deliberations at the largest annual gathering of global economic and financial officials resulted largely in boilerplate language and coverage. Unfortunately, this traditional and uncontroversial outcome is likely to do little to advance the world’s quest to overcome persistent economic malaise and the threat of financial instability.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Mohamed El-Erian is the chief economic adviser at Allianz SE. He’s chairman of Barack Obama’s Global Development Council, the author of best-seller When Markets Collide, and the former chief executive officer and co-chief investment officer of Pimco.