SANISHA PACKIRISAMY: The known unknowns: the global growth gamble

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SANISHA PACKIRISAMY: The known unknowns: the global growth gamble
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The global growth gamble: The good news is, we have a grasp on what can go wrong; the bad news is, we haven’t acted to ensure this doesn’t happen

The good news is, we have a grasp on what can go wrong; the bad news is, we haven’t acted to ensure this doesn’t happenWhile it’s true that the future is always uncertain, the global economy is facing an unusually high number of unknown variables right now.

Tighter monetary policy could worsen the pre-existing growth problems in the global economy and increase the chances of a more severe downturn. It can also hurt the financial sector, particularly for the nonbank institutions. Though commercial banks are better capitalised than before 2008, problems in nontraditional lenders could have negative spillover effects for entities with excess debt, credit risk or interest rate exposure.

To promote self-sustaining growth, China is implementing policies that focus on raising household spending and services. These changes will, however, reduce positive spillover effects on global growth.There are several geopolitical hotspots in the world that could harm global economic prospects and international relations.

This could accelerate geoeconomic fragmentation, which would make it difficult to collectively address global challenges, such as climate change. Failing to address climate change in the long run could result in real economic damage to capital and labour supply, with inflation likely to rise due to falling production of crops.Politicians’ appetite for structural reform varies widely across countries, but it’s necessary for sustained economic growth.

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