Christine Lagarde, the IMF general director, declared in a conference held this Wednesday at Jakarta that the stock markets volatility from the recent period shows how quickly risks from one economy to another can extend.
“What was proven in the past weeks is that Asia is at the center of the global economy, a lot of countries being the perfect example of how much can the problems of an Asian market can extend on the rest of the world”, she also stated.
Lately, capital and foreign exchange markets have seen large fluctuations, at a global level. The main cause was the decision taken by Chinese authorities to devalue the yuan.
Lagarde states that the global economy is dealing with negative factors, generated by the rebalancing of the Chinese economy and the slow growth in Japan. Also, the prices of prime matters, which are also falling, alongside the uncertainty caused by the prospect of raising interest rates in the United States were also major causes.
Policies must be tailored to each country, but most of them should consider consolidation protection through prudent fiscal policies and also control the excessive growth of lending, using exchange rate to act as a shock absorber, maintaining foreign exchange reserves at an adequate level, the IMF chief said.
Apparently, international institutions such as the Asian Bank for Investment in Infrastructure, Asian Development Bank and World Bank should work together to meet the high demand for financing infrastructure projects in the region.
After her arrival in Jakarta, Christine Lagarde warned that the economic growth of 2015 won’t reach IMF’s expectations, due to the slow recovery of developed countries and the slowdown taking place in emerging countries.
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