The International Monetary Fund warns that the risk of economic collapse is increasing, so we need to take immediate measures to stimulate demand.
The International Monetary Fund’s first deputy managing director, David Lipton, said at the National Association for Business Economics session that the global economy is in a “really difficult position” now.
According to him, the authorities need to act urgently to give an adequate response to the economic slowdown and the new threats arising due to volatile financial markets. “Now is the time to decisively support economic activity and put the global economy on a sounder footing,” Interfax cited Lipton as saying.
A sharp retrenchment in global capital and trade flows is one of the warning signs.
The fund’s fears are confirmed by statistical data from China. According to the main customs administration of the country, exports in February fell 25.4% in dollar terms year-over-year, compared with a drop of 11.2% in January. The decline was the largest since the beginning of 2009. Imports also declined, falling 13.8% last month, the agency reported, compared with an 18.8% drop in January.
Lipton notes that the world economy is in a critical condition: a new recession may become a reality if politicians don’t stimulate demand.
The chairman of the Duma Committee on Economic Policy, Innovation and Entrepreneurship Development, Anatoly Aksakov, noted in an interview with a correspondent of Vestnik Kavkaza that the IMF is based on outdated approaches of the development of the world economy. “Let me remind you that the United States, European Union, Japan and China have pursued a policy of quantitative easing aimed at stimulating demand. It has been implemented since 2008, but did not give the desired result,” Anatoly Aksakov said.
According to him, it requires more systematic steps, which allow to update the structure of the world economy. “The policy to stimulate demand, which was carried out by the Western countries, on the contrary, helps obsolete technologies to survive, hampering development. Quantitative easing measures have not had the desired effect, as the demand in old technologies is maintained at the same level,” the deputy explained.
As a result, Anatoly Aksakov said, the world economy is in a state of stagnation now. And Russia has a chance to take the lead. “For us, consumer demand is a good thing, because we are not an industrialized country. Now, together with the rest of the world, we are entering a new technological order and we can overcome the huge gap in technological development, developing it on a par with other countries,” the chairman of the Duma Committee on Economic Policy, Innovation and Entrepreneurship Development concluded.
The Chairman of the Board of the National Currency Association (NCA), Dmitry Piskulov, in his turn, pointed out that the issues of stimulating aggregate demand are related to the economic and theoretical field. “Demand on the part of both groups causes an increasing demand for engineering products and various services, and, respectively, economic growth. Indeed, now we see a reduction in aggregate demand, mainly due to the fact that China’s demand for raw materials, industrial and transportation services declined and there is a zero economic growth in many countries,” Piskulov agreed with Aksakov.
“Everyone has household appliances, electronics, automobiles, apartments. Basic needs are met. In this situation, we see low demand and a relatively high supply of goods at the background of a high competition. In fact, this is an economic crisis. For the past two decades China has been the engine of economic growth, not only for his country but for the whole world economy,” the expert said.
He also pointed to the need to change the world’s economic model. “A new paradigm, based either on new technologies and sources of growth, could be the way out. State demand could support the current economic model in the case of moderate demand from the population. In Russia, in my opinion, it would be an effective mechanism for increasing the demand for products of various industries,” Dmitry Piskulov believes.