Global imbalances remain a key issue for G20 leaders. This column evaluates the progress made by G20 leaders in the run up to their Cannes summit this November, concluding that the G20 process is unlikely to protect us from the risks posed by disorderly unwinding of imbalances.
Global imbalances continue to place the stability of the global economy at risk. The International Monetary Fund’s forecasts anticipate essentially no reduction in existing imbalances in the next five years, assuming the continuance of current policies. And independent observers have suggested that, if anything, the IMF may be overly optimistic about the prospects. A shock that causes those imbalances to unravel quickly could lead to sharp drops in the currencies of countries that depend most heavily on foreign finance for their current-account deficits (“countries that depend most heavily on foreign finance” being code for the US). That in turn could have major repercussions, both real and financial. As the IMF puts it, the global economic recovery could be “resting on hollow legs.”
Πηγή: Voxeu