The prospect of dimmer global growth predicted by the International Monetary Fund should make it a matter of urgency for US politicians to stop manufacturing crises.
Five years after the start of the global financial meltdown triggered by the bankruptcy of Lehman Brothers, it is pitiful that the US is now putting the fragile global recovery under renewed threat with its mind-boggling political infighting.
The IMF on Tuesday cut its global growth forecast to 2.9 percent this year and 3.6 percent for next year. This year’s growth forecast is 0.3 percentage points lower, and next year’s 0.2 percentage points down, than the July projection.
Indeed, the growth slowdown in major emerging economies, as the Washington-based global lender identified, will contribute to a global growth fall in the coming years. Both cyclical and structural problems in these economies are demanding immediate and bold reforms to make growth more sustainable.
However, when financial ministers and central bankers gather in Washington later this week to discuss global growth issues, they will be lucky if their attention is not too distracted by the US government shutdown.
The inconvenience caused by the shutdown may be the least of their worries. The elephant in the room, the once inconceivable notion of the US defaulting on its debt and ensuing dollar upheavals will have to be acknowledged.
As the world’s largest economy and the home of the global reserve currency, the US surely has the wherewithal to fund its government and avoid a catastrophic default by raising its self-imposed debt ceiling.
Yet the astonishing failure of the US Congress to put national needs before their partisan interests has sparked fears among investors and governments around the world that maybe it is time to think about the unthinkable.
That may explain why the biggest US creditors, China and Japan, have expressed concern over developments in Washington which could affect their several-trillion-dollar investments in US Treasury bonds.
US politicians can discuss, bicker and argue over government spending and economic growth. Kicking cans is one thing, but throwing caution to the wind is not a course of action worthy of the world’s leading economy.
– China Daily