Convergence of Politics and Economics is Need of the Hour for Sustainable Global Growth
Doha Bank hosted knowledge sharing session on “Changing Global Economics and their impact on growth momentum” – The event took place on 25th November 2018 at, Doha Bank auditorium 1st floor, Qatar. The concept note was given by Dr. R. Seetharaman, CEO, Doha Bank. The event was also attended by Dr. Sayuri Shirai – Professor KEIO University, Japan & Former Member of the Policy Board, Bank of Japan. The event was attended by H.E. Mr. Ranjan Mathai, Former Foreign Secretary, Government of India. The other participants to the session were high profile diplomats, high net worth Qatari individuals and local corporates.
Dr. R. Seetharaman spoke on Global economic growth and challenges ahead it faces, he said “Global growth for 2018 and 2019 is projected at 3.7 percent in October 2018 report, remains unchanged for next year 2019 as per WEO economic outlook report by IMF. In the United States, momentum is still strong as fiscal stimulus continues to increase, but the forecast for 2019 has been revised down due to recently announced trade measures, including the tariffs imposed on $200 billion of US imports from China. Growth projections have been marked down for the euro area and the United Kingdom, following surprises that suppressed activity in early 2018.
He also spoke on Qatar Economy, As per IMF, “Qatar is expected to grow by 2.7% in 2018 and 2.8% in 2019. (IMF April 2018 forecast 2.6% in 2018 and 2.7% in 2018). The Growth is revised marginally upwards. Qatar’s banking system needs no further support from the central bank and sovereign wealth fund as the decline in non-resident liabilities of lenders have subsided. A robust regulatory framework and effective supervision have helped ensure the resilience of the financial system, the IMF said the QCB is further strengthening its financial sector surveillance to detect in a timely fashion emerging pressures, including those related to liquidity, real estate sector, the impact of US monetary policy normalization and the on-going Gulf crisis. Qatar is set to increase liquefied natural gas production capacity by about 30% from 77MTPA to 110 MTPA.
Dr. Sayuri Shirai gave an overview on the Japanese economy, she said the Japanese government efforts to industrialization in the 1950’s was through establishment of EXIM Bank of Japan and Japan Development Bank, Corporate tax cuts, Provision of subsidies for R&D and adoption of foreign exchange allocation system. The economy than shifted from Trade deficit to Trade surplus by 1960’s. The Japanese economy currently is the third largest with size of USD 5Trillion, per capita GDP of USD 40K and largest international creditor. The savings rate fell in 2009-2013 but than it has picked up as a percentage to overall GDP, the current account surplus has been since 2000. The economy is shifting to an investment nation since 2006. The total foreign assets is USD 3Trillion or 64% of GDP which is the largest in the World. The composition of FDI flows is 33% from USA, 27% from Asia, 27% from Europe, 10% from China and Hong Kong, 5% from Australia and 7% from Latin America. The challenges that Japan faces today is that it is shifting from export oriented to investment driven, a most-progressive ageing society, labor shortage, restraining labor productivity growth on account of shift from manufacturing to services oriented.
H.E. Mr. Ranjan Mathai spoke on challenge to the globalist world order, and an intensification of geopolitical competition. He examined the election of Trump, Brexit, China’s rejection of the World Court ruling on South China Sea and Russia’s intervention in Syria.
He said the US under Trump has increased uncertainty in global politics and economics. It is now clear that “America First” does not mean withdrawal or isolation; but a reshaping of global commitments, following cost benefit analyses of how specific relationships have helped the US both economically, and in retaining predominant power. Mr. Trump has long held nationalist views; his attitude, and those of his supporter’s matters, as USA is still the most powerful country and one of the most prosperous with continued growth. Trump has managed to get NAFTA amended, he has taken US out of TPP and is trying to reshape WTO.
For China now the opportunity is stepping in to take a much larger role in shoring up or shaping a new world order. But there are limiting factors as the failure to conclude the Regional Comprehensive Economic Partnerships negotiations shows. Other countries in Asia, Japan and India included, are continuing engagement with China while pursuing preparedness to defend their interests. Japan is the other key country in East Asia. Prime Minister Abe will leave a different Japan if this plans for a more active defence policy succeed. Abe now has the chance to make the TPP into a regional group independent of both US and maybe China.
Russia under Putin is determined to play itself back into a globally relevant role. Trump is open to this, and wants to reach some understanding with Russia, perhaps create a triangular scenario to China’s disadvantage, but faces resistance from within the US to establish meeting.
Europe itself looks to be in a state of confusion. It has weathered the storm of the migration crisis of 2015-16. But it has not recovered from the drop in momentum after the economic crisis of 2008- particularly over employment of the young, the drive for “ever closer union” has slowed. West Asia or the Middle East has traditionally been an arena of great power competition and hence in turmoil. Since 1991 much of the trouble has been traced to political difficulties in the political dimension of Islam; but intensified by struggle for control over resources and trade routes, by global powers. Foreign policy dynamics in this region will revolve around coalitions competing over regional preponderance, and directions of energy flows.
South Asia, Latin America, and Africa in particular are future growth poles in the world if they can manage their politics. African mineral resources which are essential for the hi-tech and green economy of the future, will be the target of a new global competition.
The nationalist phase in foreign policies will produce winners and losers but will not minimize risk of a heavily armed World. It is important for foreign policies to strengthen multilateral institutions which moderate competition and conflict, and pursue a rule based World order.