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According to Yonhap News,
(WASHINGTON=Yonhap News) South Korea's finance minister called on top economic policymakers from around the world Friday to pursue "bold" stimulus policies to speed up the global economic recovery, saying the world is faced with "secular stagnation."
Choi Kyung-hwan issued the appeal in a written speech submitted to the annual meeting in Washington of the International Monetary Fund (IMF) and the World Bank Group, expressing concern that the global economy "may have entered an extended period of mediocre growth."
"We are at an opportune time for creative and bold growth-friendly policies tailored to each country's circumstances," he said. "Well-designed expansionary macroeconomic policies encourage labor market participation and promote consumption and investment, which in turn leads to increased tax revenue."
Choi said the emphasis on restoring fiscal soundness in the short-term to improve the credibility of governments has proven successful in the process of overcoming the crises so far, but its impact was limited during the global economic recovery that followed.
"We have successfully overcome the global financial crisis and European sovereign debt crisis through bold expansionary policies and close coordination. However, we now face 'secular stagnation' that is quite different from the previous crises," he said.
Secular stagnation refers to a situation where net savings exceed net investments, which leads to no growth.
Choi stressed that the global economy is recovering slowly, but the pace is weaker than expected. As countries are at different stages of recovery, it is difficult to craft a unified response and downside risks are rising, he said.
"Uncertainty remains in the financial markets due to the divergence in monetary policies among advanced economies. With reduced growth potential and low inflation in addition to geopolitical risks in Ukraine and the Middle East, there are increasing concerns that the global economy may have entered an extended period of mediocre growth," he said.
Choi also called for structural reforms. Though structural reforms have usually been considered medium- or long-term tasks, they can also lead to short-term growth by improving economic sentiment, promoting investment and increasing productivity, he said.
He also appealed for closer policy coordination among countries.
"If individual countries only prioritize domestic policy goals, their actions may have negative effects on neighboring economies, possibly through volatility in exchange rates. This in turn will throw cold water on not only the global recovery, but ultimately the countries themselves," Choi said.
"To manage these diversified global risk factors and pursue common interests, countries must continue to promote clear communication and close coordination," he said.
On Friday, Choi also attended a meeting of the finance ministers from the Group of 20 major economies and discussed ways to implement the so-called "global infrastructure initiative" that calls for putting more financial resources into infrastructure construction to spur the world economy.
Choi later told reporters that he expressed support for the initiative because he believes infrastructure investment is a key tool for creating future growth engines. He said he also called for G20 members to take joint steps together for the initiative.
The G20 economies are scheduled to hold a summit of their leaders in Australia next month.
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Source: Yonhap News (October. 11, 2014)