Industry chiefs optimistic about economy in 2021

Industry chiefs optimistic about economy in 2021
The World Bank has cut its 2021 global growth forecast to 4 percent and said the rise in output could be as little as 1.6 percent if there were vaccine delays. (AP)
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Updated 14 January 2021

Industry chiefs optimistic about economy in 2021

Industry chiefs optimistic about economy in 2021
  • Call for global solidarity to mitigate effects of pandemic

LONDON: Vaccines and fresh economic stimulus promised by US President-elect Joe Biden will give the global economy a chance to put the coronavirus pandemic behind it in 2021, policymakers and industry leaders told the Reuters Next conference.

Their optimism came despite a resurgence in COVID-19 cases that has prompted the World Bank to downgrade its growth forecast for this year and warn that delays in vaccination programs could pinch recovery even further.

The head of German engineering giant Siemens AG said China is currently driving the world economy but was optimistic about recovery in the US, where Biden has promised a faster
rollout of vaccines and more economic stimulus.

“In the US, they are holding all the cards and if they put the money to work in a wise way, there is going to be a very, very, strong second half of 2021 and especially 2022,” Siemens Chief Executive Joe Kaeser said.

Europe and the US both now need to “get their act together and put the billions and trillions of dollars and euros which have been promised to work,” he told the digital forum.

The World Bank last week cut its 2021 global growth forecast to 4 percent from 4.2 percent and said the rise in output could be
as little as 1.6 percent if there were vaccine delays.

European Central Bank President Christine Lagarde nevertheless stuck to the ECB’s existing forecasts for the eurozone, provided lockdown measures are lifted by the end of March and vaccines adequately distributed.

She cited as positives the fact that, after elections in the state of Georgia, Biden could count on US Senate support for his economic program and that Britain and the EU had managed to avert a no-deal Brexit on Dec. 31.

“Some of the uncertainties we had on the horizon that made us look at the future with a dark cloud over our heads, some of that has been cleared,” Lagarde told
the conference.

“From that perspective we start on a more positive basis than what some would like to look at,” she added, vowing that the ECB had the capacity to add emergency stimulus if needed.

The ECB sees growth of 3.9 percent this year across the 19 countries that use the euro currency, more optimistic than many private sector economists.

China loans

Asked about the risk that developing nations could be left behind in the economic recovery as their people struggle to pay for COVID-19 vaccines, Lagarde said it would “backfire” on the rich world if they did not show solidarity.

“It is in the self-interest of developed countries to make sure that low-income, developing, fragile states have access to vaccination as it is needed,” the ECB chief said.

World Bank Chief Economist Carmen Reinhart said increasing debt distress in many of those countries meant that China, now the world’s largest official creditor, would need to start restructuring the debt it is owed.

“What I think China will need to do to confront this is what previous other creditors in the past had done, which is you have to restructure,” Reinhart told a panel on economic inequality.

“And restructure big time, meaning either lower interest rates, longer maturities, write-off in principal or some combination of that.”

 


IMF: Iraq has requested emergency assistance

IMF: Iraq has requested emergency assistance
Updated 48 min 46 sec ago

IMF: Iraq has requested emergency assistance

IMF: Iraq has requested emergency assistance
  • The OPEC member’s economy has only a small manufacturing base and almost all goods are dollar-priced imports

Iraq has requested emergency assistance from the International Monetary Fund and talks are ongoing between the parties, the IMF said late on Sunday.
Iraqi Finance Minister Ali Allawi told Bloomberg News earlier that Iraq was in talks with the IMF for a $6 billion loan package.
“The Iraqi authorities have requested emergency assistance from the IMF under the Rapid Financing Instrument, and indicated their intention to also request a longer-term arrangement with the Fund in support of planned economic reforms,” an IMF representative said in an emailed statement.
“Discussions of the authorities’ request for emergency assistance are ongoing.”
The IMF’s Rapid Financing Instrument provides quick financial assistance, which is available to all member countries facing an urgent balance-of-payments need.
Financial assistance under the RFI is provided without the need for a full-fledged program or review, according to the IMF website https://bit.ly/3c6YubX.
Iraq may ask for an additional $4 billion in low-cost loans through another program linked to government reforms, Allawi said on Sunday.
Iraq devalued the dinar last month after a collapse in global oil prices, a major source of Iraq’s financial resources.
Allawi told Bloomberg that Iraq also planned other types of funding to help plug the budget gap. Once the spending plan was approved, the government would move to issue $5 billion in domestic bonds to expand its financial base.
The OPEC member’s economy has only a small manufacturing base and almost all goods are dollar-priced imports.