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Rebalancing the World Economy

February 2nd, 2010 at 08:38am Under Economy Report

This is the VOA Special English Economics Report.

Last week’s meeting in Pittsburgh, Pennsylvania, was the third Group of 20 summit in less than a year. Leaders of the major developed and developing economies discussed ways to fix the world financial system.

In April they had agreed to do everything necessary to prevent a collapse. This time they noted their success, but warned that the “process of recovery and repair remains incomplete.”

German Finance Minister Peer Steinbruk, left, and U.S. Treasury Secretary Timothy Geithner at the G20 meeting

The presidents and prime ministers launched what they called a Framework for Strong, Sustainable and Balanced Growth. At the same time, they agreed to make the G20 the main group — the “premier forum” — to guide international economic cooperation.

For years that has been a job for the Group of 8: Britain, Canada, France, Germany, Italy, Japan, Russia and the United States. But the G8 leaves out developing nations with big populations and growing economies like China, India and Brazil.

In Pittsburgh, rich nations agreed to also give up some of their representation in the International Monetary Fund. And they called for more voting power for developing nations in the World Bank.

Ghiyath Nakshbendi is a professor of international business at American University in Washington. He says the decision to cooperate on economic policy is important given how much Gross Domestic Product the G20 represents.

GHIYATH NAKSHBENDI: “They are going to work together in order to achieve the goals of the world — that really, when you talk about the G20, you are talking about nineteen countries plus the E.U. that produce ninety-five percent of the G.D.P. in the world.”

Martin Edwards is an assistant professor at Seton Hall University in New Jersey who has written about the I.M.F. He says increasing the influence of developing nations will increase the standing of the fund and the World Bank. But he notes that having more players at the table could also mean more disputes.

In terms of financial reforms, experts say there is widespread support for some proposals to control risks. But others are unpopular in America and Britain. These include linking the pay of bankers to their bank’s long-term performance.

G20 leaders plan to meet next in Canada in June and in South Korea next November. They face many hard choices in the coming months. Professor Nakshbendi says the biggest question is to what extent are they willing to follow their own advice.

And that’s the VOA Special English Economics Report, written by Mario Ritter. I’m Steve Ember.

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International Monetary Fund Says World Economy Will Shrink This Year

September 1st, 2009 at 03:22am Under Economy Report

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This is the VOA Special English Economics Report.

The World Bank and the International Monetary Fund will meet in Washington, D.C.  Saturday and Sunday. One subject for discussion will be falling expectations for world economic growth.

A new report by the I.M.F. estimates that the world economy will shrink by one and three-tenths percent this year. That would be the worst performance in more than sixty years.  Three months ago, the I.M.F. predicted a small growth for this year.

I.M.F. Chief Economist Olivier Blanchard, left, speaking in Washington Wednesday

Major industrialized economies are expected to see the biggest decreases, shrinking by almost four percent. The I.M.F. predicts developing countries will continue to grow for the year, but only by about one and one-half percent.

The I.M.F. says the world will slowly return to growth of almost two percent next year. But the lending organization warns that strong policies to supervise and support the financial system are needed if the world economy is to fully recovery.

Olivier Blanchard is the chief economist for the I.M.F.  He has said that banks are still in the process of rebuilding their financial positions. He added that securities markets are still operating poorly.

Economic experts believe the world financial industry is moving towards recovery but with more losses to come. In all, the I.M.F. says worldwide financial losses could be as high as four trillion dollars by the end of next year.  World trade is expected to drop eleven percent this year, after expanding by three percent last year.

The I.M.F. report says international lending may not fully recover until two thousand eleven. The financial crisis has made the I.M.F. more important than ever. The world’s largest economies promised to increase the size of the fund by about five hundred billion dollars. They did so at the G-Twenty meeting in London earlier this month. This week, President Obama proposed that the United States lend the I.M.F. one hundred billion dollars as part of that promise.

Last week, Mexico became the first nation to borrow from the I.M.F. under a new program to provide emergency credit to nations with strong economies. Mexico received a forty-seven billion dollar line of credit for one year. Poland and Colombia are also seeking loans from the program.

And that’s the VOA Special English Economics Report, written by Mario Ritter.  You can find more financial news, plus transcripts and archives of our programs at voaspecialenglish.com. I’m Steve Ember.

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