Olivier Blanchard

The International Monetary Fund (IMF) yesterday presented a gloomier picture of the global economy than a few months ago, saying prospects have deteriorated further and risks increased.

In its World Economic Outlook, the IMF slashed its growth forecast for large parts of the world economy and warned of a full-blown global slump if policymakers in Europe or the US mishandle serious threats.

“Risks for recession in the advanced economies are alarmingly high. The intensity of the euro area crisis has not abated as assumed in previous projections,” it said.

The warning came from the Washington-based lender when it unveiled its outlook in Tokyo ahead of the IMF-World Bank 2012 Annual Meetings.

Overall, the lender's forecast for global growth was marked down to 3.3 percent this year and a still sluggish 3.6 percent in 2013.

The IMF said advanced economies are projected to grow by 1.3 percent this year, compared with 1.6 percent last year and 3.0 percent in 2010, with public spending cutbacks and the still-weak financial system weighing on prospects.

Growth in emerging market and developing economies was marked down compared with forecasts in July and April to 5.3 percent, against 6.2 percent last year. Leading emerging markets such as China, India, Russia, and Brazil will all see slower growth.

Growth in the volume of world trade is projected to slump to 3.2 percent this year from 5.8 percent last year and 12.6 percent in 2010.

In developing Asia, real GDP growth will average 6.7 percent in 2012 and is forecast to accelerate at 7.25 percent in the second half of 2012. The main driver will be China, where activity is expected to receive a boost from accelerated approval of public infrastructure projects.

China, the world's second largest economy, will also see its economy to grow 7.8 percent this year and 8.2 percent next year. India will grow by 4.9 percent and 6 percent in 2012 and 2013 respectively.

The IMF said the outlook for India is unusually uncertain: for 2012, with weak growth in the first half and a continued investment slowdown, real GDP growth is projected to be close to 5 percent, but improvements in external conditions and confidence -- helped by a variety of reforms announced very recently -- are projected to raise the real GDP growth.

IMF Chief Economist Olivier Blanchard said the world economic recovery continues, but it has weakened further.

"In advanced economies, growth is now too low to make a substantial dent in unemployment, and in major emerging markets, growth, which had been strong earlier, has also decreased."

Blanchard said there are two forces -- fiscal consolidation and weak financial systems -- which continue to pull growth down.

"In most countries, fiscal consolidation is proceeding according to plan, and while consolidation is needed, there is no question that it is weighing on demand and, therefore, on output. And, the evidence increasingly suggests that in the current environment, the fiscal multipliers, the effect of fiscal consolidation on demand and output, are large."

"The financial system is still not functioning efficiently. In many countries, probably more so in Europe than either in the US or in Japan, banks are still weak, and their position is made worse by low growth. As a result, many borrowers still face tight borrowing conditions, decreasing their demand as well."

The forecast said that monetary policy in advanced economies was expected to remain supportive. Major central banks have recently launched new programs to buy bonds and keep interest rates low.

But the global financial system remains fragile and efforts in advanced economies to rein in budgetary spending, while necessary, have slowed a recovery.

The recovery is forecast to limp along in the major advanced economies, with growth remaining at a fairly healthy level in many emerging market and developing economies.

In the United States, growth will average 2.2 percent this year. Real GDP is projected to expand by about 1.5 percent during the second half of 2012, rising to 2.75 percent later in 2013.

In the euro area, real GDP is projected to decline by 0.4 percent in 2012 overall, about 0.75 percent (on an annualised basis) during the second half of 2012.

With lower budget cuts and domestic and euro area, wide policies supporting a further improvement in financial conditions later in 2013, real GDP is projected to stay flat in the first half of 2013 and expand by about 1 percent in the second half.

In Japan, growth is projected at 2.2 percent in 2012. The pace of growth will diminish noticeably as post-earthquake reconstruction winds down. Real GDP is forecast to stagnate in the second half of 2012 and grow by about 1 percent in the first half of 2013.

Thereafter, growth is expected to accelerate further.

At a separate press conference, Carlo Cottarelli, head of the IMF's Fiscal Affairs department, said in many advanced economies efforts to reduce debts and deficits will need to persist for many years for debt ratios to return to their pre-crisis levels.

“Efforts at controlling debt stocks are taking longer to yield results,” said Cottarelli after he produced the latest edition of the Fiscal Monitor report of the IMF.

“Debt reduction is taking longer than after previous recessions, mostly due to the magnitude of the recession and the sluggishness of the recovery afterward.”

In the report, the IMF observes that deficits are set to narrow in nearly all advanced economies in 2012 and 2013 even in the face of weak economic growth.

In about half of the advanced economies, cyclically adjusted fiscal deficits will be smaller next year than they were in 2007, before the start of the crisis.

News: The Daily Star/Bangladesh/10th-Oct-12

Ali Reza Iftekhar, managing director and chief executive officer (CEO) of Eastern Bank Limited (EBL) has been adjudged CEO of the Year at the second Asian HR Leadership Awards, held at Taj Palace Hotel, Dubai recently, says a press release.

Hosted by Asian Confederation of Business and supported by Star of the Industry Group the awards follow the objective to recognize outstanding corporate business leaders in Asia and to honour their achievements in region’s economic growth.

World HRD Congress and World Brand Congress are the strategic partners of the programme.

Iftekhar said, “It’s a great honour and recognition for me. The award will act as a source of inspiration in my future endeavours for development of country’s economic sector.”

Out of 45 nominations from Asia the Jury board selected Ali Reza Iftekhar for the award for his achievements and significant contributions in country’s post recession economic development.

News: The Daily Independent/Bangladesh/9th-Oct-12

Bangladesh Bank asked commercial banks to comply with rules and regulations to retain public confidence in the banking business.

“As the banks are the hub of the financial intermediation, it is an important responsibility for the banking sector executives to retain public confidence in the banking system,” said Atiur Rahman, BB Governor, while unveiling the financial stability report 2011, at its office on Sunday. High officials of the central bank, managing directors, chief executive officers and other high officials of all scheduled banks were present at the event.

Atiur urged senior bankers to shield the banking and NBFI sectors from risks and vulnerabilities and said reasonable emphasis are being given to both on-site supervision and off-site surveillance by the BB.

“However, efforts of the central banks alone will not be fruitful if effective implementation of prudential rules and regulation are not properly maintained by the scheduled banks, non-bank financial institutions, and regulators of other financial intermediaries,” he noted.

Ensuring effective implementation of, and compliance with, prudential regulations and supervisory instructions of Bangladesh Bank is to keep systemic crises away from commercial banks.

These regulations and instructions will be rolled out in the coming months, he also said. “But do not be concerned that the sector will become over-regulated.

Regulations promoting stability in the sector as a whole will be complementary to regulations promoting the stability of individual institutions.

They are not conflicting in nature, nor are they intended to create an undue burden,” he said.

As Managing Directors of the banks and financial institutions, the bankers should understand that the legal and regulatory framework – in particular, expectations for risk management, minimum capital and liquidity requirements, large exposure limitations, and conservative accounting and reporting requirements including recognition of expected losses – are the best banking practices.

The central bank also warned that Bangladesh Bank will not allow imbalances and excessive linkages to build up in the banking sector as they did in some parts of the developed world.

“We are monitoring the rate of credit growth at individual institutions and in the sector as a whole.
We will not permit banks to become too tightly woven together with excessive interbank lending, borrowing, depositing, and debt and equity ownership,” BB Governor said.

News: The Daily Independent/Bangladesh/9th-Oct-12

Maj Gen Ashraf Abdullah Yousuf, Adjutant General of Bangladesh Army and Vice-Chairman of Trust Bank Limited, hands over a key of a microbus to Maj Gen Mohammad Imrul Kayes, Director General of Bangladesh Institute of International Studies at a function in Dhaka recently.

News: The Daily Sun/Bangladesh/9th-Oct-12

Abhay Seth, Chief Sales and Marketing Officer of Airtel Bangladesh, and ANM Mahfuz, General Manager of Premium Banking of Standard Chartered Bank, sign agreement at Airtel office in Dhaka recently.

News: The Daily Sun/Bangladesh/9th-Oct-12