BALI • The International Monetary Fund (IMF) holds its annual meeting this week in earthquake-stricken Indonesia, as it shines a light on tremors in the global economy: rising protectionism, vulnerable emerging markets and record debt levels.
Finance ministers and central bankers from 180 nations will be among 32,000 attendees in Bali for the annual meeting of the IMF and World Bank, which takes place every three years outside of Washington. The gathering will be held from tomorrow to Sunday.
The resort island of Bali is 1,125km from Palu, the city in Sulawesi that was devastated by the Sept 28 earthquake and tsunami that left more than 1,700 dead and 1,000 missing. Despite the distance, security is a major concern for the Indonesian organisers. Bali experienced a series of volcanic eruptions over the summer, while the neighbouring island of Lombok was struck by a string of deadly earthquakes.
If there is an earthquake, Jakarta recommends participants stay in the conference centre, which, like many hotels in Bali, is built to withstand such seismic events. If there is a tsunami risk, attendees would be evacuated to a nearby building.
But the focus of the meeting is averting economic rather than natural disasters.
Like the Organisation for Economic Cooperation and Development, which lowered its economic growth forecast for the world economy to 3.7 per cent for this year, IMF managing director Christine Lagarde signalled that the fund would cut the outlook, which in July stood at 3.9 per cent. After sounding the alarm in recent years about threats to the global economy, Ms Lagarde said earlier this month that “some of those risks have begun to materialise” and “there are signs that global growth has plateaued”.
The rise in trade barriers is slowing trade, and dampening investment and manufacturing as uncertainty increases, she said. And she repeated the warning about rising debt levels which “reached an all-time high of US$182 trillion (S$252 trillion) – almost 60 per cent higher than in 2007”.
The number of countries sending finance ministers and central bankers to the annual IMF and World Bank meeting, which will have 32,000 attendees.
That creates concerns for emerging market economies, which will come under increased pressure as the United States central bank raises interest rates, while investors are likely to pull out of those markets, seeking higher returns. Argentina and Turkey have already been hit by headwinds, seeing their currencies collapse and forcing Buenos Aires to go to the IMF for help.
The fund recently increased support for Argentina by US$7 billion to reach US$57 billion, in exchange for tough economic policy reforms, although the loan has not yet been approved by the IMF board.
But economist Monica de Bolle of the Peterson Institute for International Economics said Brazil was also likely to see market turbulence next year, and that South Africa is vulnerable as well. “This is not going to end well,” Ms de Bolle said of the emerging market outlook.
There could be broader repercussions in the event that China’s economic engine slows sharply amid the trade confrontation.
Group of 20 finance ministers are also due to meet in Bali on the sidelines of the IMF meeting to discuss topics such as US sanctions against Iran or taxes on digital giants.