“Combination of Worries” Gets Attention in Davos

By iMFdirect

Europe’s sovereign debt crisis, fiscal challenges in advanced economies, concerns about overheating in emerging market countries, and the impact of rising food prices. These are the hot topics at this year’s World Economic Forum in Davos, Switzerland, and a clear sign of the tensions and risks as the global economy recovers.

In a video interview from Davos, IMF First Deputy Managing Director John Lipsky tells us that, with the return of global growth, the mood is certainly more optimistic than it was a year or two ago. But there is also a clear sense among delegates that this has not solved some of the world’s important economic problems.

These issues echo many of those highlighted in recent updates of the IMF’s World Economic Outlook and Global Financial Stability Report.

On the European debt crisis, Lipsky said that “they hope the worst is over, but not certain yet.” Markets are looking to see the success of policy programs in some countries and for further action, including on a “so-called comprehensive set of measures to deal with these problems in the future,” he said.

As outlined in the latest update of the IMF’s Fiscal Monitor, advanced economies face significant challenges in reducing their budgets over medium-term. For them, Lipsky said, “it’s time to start laying out credible plans.”

On the other hand, many emerging market countries have been growing rapidly, but there is now a “combination of worries”—the potential for rising inflation and even overheating, plus the recent run-up in food and energy prices.

Perhaps the real worry for the longer-term health of the global economy is that the lingering global imbalances show “no sign” of letting up. So, there is a desire among policymakers to “address the underlying issues that gave rise to these imbalances,” Lipsky said.

3 Responses

  1. The Nordic countries have a model that is very protective and very expensive that few countries can afford. For some northern countries, the social equilibrium is made possible by oil, which now becomes profitable to operate in their area. However, even with a system so advanced, there are negative points. ARTE had a story about the failed integration of emigration, for example, despite the large amount of aid. So the Nordic model can not be duplicated and implemented in all countries.

  2. “The Nordic way” at the World Economic Forum in Davos. What’s so special about the Nordics? In international comparisons, not least the World Economic Forum’s global competitiveness index, the Nordic countries are almost always found at or near the top. In one meta-index that is an aggregate of 16 different global indices (competitiveness, productivity, growth, quality of life, prosperity, equality etc) the four main

    Nordic countries − Sweden, Norway, Denmark and Finland − top the list. What are the reasons? Is there such a thing as a common “model” particular to the Nordics and if so, will it last? Is it sustainable, even transferable to other parts of the world?

    In this little brief we would like to provide bits and pieces of what we believe are some plausible explanations for the relative success of the Nordic societies. If these experiences can improve the understanding of our way of doing things and inspire debate and development in other parts of the world we will be very pleased.

    Shared values are also about sharing values and experiences with others. The fact that Nordic countries showed resilience during the recent financial crisis largely seems to be the result of previous deep crises in the Nordic region in the 1980s and 90s. During these crises, the Nordic countries renewed and modernized their respective economies in ways which sometimes constituted a break with previous regulations and tax systems.

    Lena Bäcker

    Chief Economist

    Kommuninvest in Sweden

    The Swedish Local Government Debt Office

  3. […] This post was mentioned on Twitter by Jane Ginn, C F and Jeannie Hartley , C F. C F said: RT @SedonaCyberLink: “Combination of Worries” Gets Attention in Davos « iMFdirect – The IMF Blog http://scl.tv/eeG1UZ […]

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