THE Philippines has called on the World Bank Group (WBG) and the International Monetary Fund (IMF) to spearhead discussions on the “dangerous convergence” of several adverse economic developments that could “open the door to a global recession,” and undermine the prospects for growth and equitable development of emerging economies, according to the Department of Finance (DOF).
Finance Secretary Carlos G. Dominguez III said the Philippine government is “deeply concerned” over the “ultimate consequences” of this convergence that could curtail the Philippines’s prospects for inclusive growth and choke the flow of investments necessary to sustain its current economic expansion.
The convergence was pointed out to be the deepening trade tensions between the world’s two biggest economies, namely, the United States and China, along with the surge in crude-oil prices, resulting partly from the trade blockades against certain oil exporters, and the rising interest rates brought about by the normalization of monetary policies in advanced economies.
“We call on the IMF and the WBG to highlight the perils posed by this convergence. If present trends continue, all the work we have put in preparing our economies for competitive trade, improving our domestic efficiency and maintaining the highest standards for fiscal discipline will fail to ensure inclusive growth,” read the Philippines’s country statement submitted by Dominguez to the WBG during the Annual Meeting of its Board of Governors recently held in Bali, Indonesia.
The finance chief said the escalating trade tensions between the US and China could lead to a slowdown in global economic performance, which will hurt emerging economies like the Philippines and poor countries the most.
“An open global trading regime is the only guarantee for sustained and inclusive growth.
We are deeply concerned over the effects of the trade war on our own protspects for growth and equitable development,” he added.
He also explained that rising interest rates resulting from the monetary policy normalization in advanced economies may affect the investments that go into emerging economies.
“The present trend could further curtail our growth prospects and choke the flow of investments emerging economies direly need to sustain their expansion,” he said.
He expressed great concern over the sharp rise in world crude oil prices, which causes inflation rates to soar and curtails the capacity for expansion of emerging economies.
“Historically, cycles of rising oil prices have been reversed only by the onset of global recession. At their present price levels, oil prices raise the prospects for global economic slowdown. Combined with the other factors mentioned above, a prolonged slowdown in global growth will be unavoidable,” he added.
Image credits: AP/Mark Schiefelbein