News / Economy

IMF: Rich Nations' Debt Stabilized, Public Investment Needed

IMF Says Rich Countries to Propel Global Economy Forwardi
X
Mil Arcega
April 09, 2014 11:27 PM
The International Monetary Fund says the global economy is strengthening but warned of rising risks in emerging economies. The acceleration has been mainly fueled by stronger growth in advanced economies like the United States and the United Kingdom, but the IMF says developing nations have not fared as well. That’s particularly true in Russia, Brazil and South Africa - where growth is likely to be slower than the IMF’s previous forecasts. Mil Arcega has more for VOA.
Watch video on the global economy by VOA's Mil Arcega.
Reuters
Public debt in the world's richest nations has stabilized after being nearly halved since the global financial crisis, but remains at historic highs as pressure mounts on governments to spend more in the coming years, the IMF said on Wednesday.
 
The Fund, which analyzes the economic policies of its 188 member countries, also warned in its twice-yearly Fiscal Monitor report that the world's falling stock of public capital could crimp future economic growth.
 
Public capital refers to government-owned physical assets such as highways, airports, sewage systems and other infrastructure that contribute to productivity, resulting in economic growth.
 
The IMF report shows the competing pressures on governments, and the difficulty of fulfilling the Group of 20 nations' pledge in February to lift global output by an extra 2 percent over five years amid already-high debt levels.
 
The IMF said advanced economies could slow some of their debt-cutting this year to reduce the drag on growth, but they cannot stop entirely, as their debt is likely to stay stuck above 100 percent of national output by 2019.
 
Emerging markets, however, should also pay more attention to debt and deficit levels, especially because interest rates will rise when advanced nations start to tighten monetary policy.
 
“Those emerging market economies with large debt and deficits and most vulnerable to market volatility should start to rein in deficits now,” Sanjeev Gupta, the acting director of the IMF's fiscal affairs department, said in prepared remarks.
 
But richer nations will see their social spending increase in the coming years as populations age. And in emerging markets, citizens are likely to demand more services and public goods as incomes rise.
 
Countries should consider implementing reforms to ensure social spending remains sustainable, including raising the retirement age, the IMF said. Setting limits or rules on how much a government can spend could also help, it said.
 
Public investment needed
 
The IMF also warned that advanced countries were so focused on cutting debt in recent years that they ignored public investment, contributing to the decline in public capital.
 
“With private investment also falling in many economies, cutbacks in government investment may hinder medium- and long-term growth,” the IMF said in the report.
 
Richer nations should consider partnering more with the private sector, or even increasing public investment as long as it provides a good rate of return. The IMF estimated that government investment would need to rise by almost 2 percentage points of GDP through 2030 in advanced economies just to stem the decline in public capital.
 
The IMF said emerging markets also needed to focus on reducing wasteful public investment, noting that only half of the heavy increase in government investment from 1980 to 2012 had flowed into productive capital.
 
“Inefficiencies reflect the poor quality of the projects selected and the weakness of public investment management processes such as procurement and auditing,” the Fund said.
 
Getting rid of all inefficiencies by 2030 would give the same boost to public capital as increasing government spending by 5 percentage points of GDP in emerging markets, and by 14 percentage points of GDP in the poorest countries.

You May Like

Disappointing Report on China's Economy Shakes Markets

In London and New York shares lost 3 percent, while Paris and Germany dropped around 2.4 percent More

DRC Tries Mega-Farms to Feed Population

Park at Boukanga Lonzo currently has 5,000 hectares under cultivation, crops stretching as far as eye can see, and is start of ambitious large-scale agriculture plan More

Video War, Drought Threaten Iraq's Marshlands

Areas are spawning ground for Gulf fisheries, a resting place for migrating wildfowl, source of livelihood for fishermen and herders who have called the marshes home for generations More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Nobel Prize Winner Malala Talks to VOAi
X
August 31, 2015 2:17 AM
Nobel Peace Prize winner Malala Yousafzai met with VOA's Deewa service in Washington Sunday to talk about women’s rights and unveil a trailer for her new documentary. VOA's Katherine Gypson has more.
Video

Video Nobel Prize Winner Malala Talks to VOA

Nobel Peace Prize winner Malala Yousafzai met with VOA's Deewa service in Washington Sunday to talk about women’s rights and unveil a trailer for her new documentary. VOA's Katherine Gypson has more.
Video

Video War, Drought Threaten Iraq's Marshlands

Iraq's southern wetlands are in crisis. These areas are the spawning ground for Gulf fisheries, a resting place for migrating wildfowl, and source of livelihood for fishermen and herders. Faith Lapidus has more.
Video

Video Colombians Flee Venezuela as Border Crisis Escalates

Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Rebuilding New Orleans' Music Scene

Ten years after Hurricane Katrina inundated New Orleans, threatening to wash away its vibrant musical heritage along with its neighborhoods, the beat goes on. As Bronwyn Benito and Faith Lapidus report, a Musicians' Village is preserving the city's unique sound.
Video

Video In Russia, Auto Industry in Tailspin

Industry insiders say country relies too heavily on imports as inflation cuts too many consumers out of the market. Daniel Schearf has more from Moscow.
Video

Video Scientist Calls Use of Fetal Tissue in Medical Research Essential

An anti-abortion group responsible for secret recordings of workers at a women's health care organization claims the workers shown are offering baby parts for sale, a charge the organization strongly denies. While the selling of fetal tissue is against the law in the United States, abortion and the use of donated fetal tissue for medical research are both legal. VOA’s Julie Taboh reports.
Video

Video Next to Iran, Climate at Forefront of Obama Agenda

President Barack Obama this week announced new initiatives aimed at making it easier for Americans to access renewable energy sources such as solar and wind. Obama is not slowing down when it comes to pushing through climate change measures, an issue he says is the greatest threat to the country’s national security. VOA correspondent Aru Pande has more from the White House.
Video

Video Arctic Draws International Competition for Oil

A new geopolitical “Great Game” is underway in earth’s northernmost region, the Arctic, where Russia has claimed a large area for resource development and President Barack Obama recently approved Shell Oil Company’s test-drilling project in an area under U.S. control. Greg Flakus reports.
Video

Video Philippine Maritime Police: Chinese Fishermen a Threat to Country’s Security

China and the Philippines both claim maritime rights in the South China Sea.  That includes the right to fish in those waters. Jason Strother reports on how the Philippines is catching Chinese nationals it says are illegal poachers. He has the story from Palawan province.
Video

Video China's Spratly Island Building Said to Light Up the Night 'Like A City'

Southeast Asian countries claim China has illegally seized territory in the Spratly islands. It is especially a concern for a Philippine mayor who says Beijing is occupying parts of his municipality. Jason Strother reports from the capital of Palawan province, Puerto Princesa.
Video

Video Ages-old Ice Reveals Secrets of Climate Change

Ice caps don't just exist at the world's poles. There are also tropical ice caps, and the largest sits atop the Peruvian Andes - but it is melting, quickly, and may be gone within the next 20 years. George Putic reports scientists are now rushing to take samples to get at the valuable information about climate change locked in the ice.

VOA Blogs

World Currencies

EUR
USD
0.8916
JPY
USD
121.32
GBP
USD
0.6487
CAD
USD
1.3252
INR
USD
66.401

Rates may not be current.