http://timesofindia.indiatimes.com/articleshow.asp?art_id=767719373
WASHINGTON: A month before the annual meetings of the World Bank and IMF, cut short from one week to two days, the atmosphere here is one of gloom bordering on doom.
Organisers are nervous that anti-globalisation demonstrators would be descending on the city as international bankers cower behind barricades manned by hundreds of armed police and secret agents.
The IMF Survey, an official IMF publication, captures the atmosphere in a supplement, saying bluntly that "the world economy has gone from boom to gloom."
Events in several emerging market economies this year - Argentina, Brazil and Turkey, it notes, "have made it clear that the risk of financial crisis is still very real."
Analysts have pointed out that China and India are able to ride out the latest crisis, as they did the earlier East Asian and Latin American crises, but they are not economic locomotives of the world. The locomotives - the US, Europe and Japan - are sputtering, gasping for breath as they pull harder and harder.
It says that the rise in world oil prices during 2000, weaker equity markets, a slump in the high-tech sector and continued difficulties in the financial and corporate sectors in Japan are among the factors that have "dampened world economic growth" in 2001.
Global output growth is now projected to come in at slightly less than 3 per cent, down from almost 5 per cent in 2000.
The IMF consoles itself saying that although short-term prospects have worsened significantly during 2001, the most likely outcome remains a relatively mild and short-lived slowdown, with growth recovering in 2002-03.
"Nevertheless, there are significant downside risks in this scenario, including those associated with the external imbalances of the US and some other major countries, still richly valued equity markets in many countries, and the financial difficulties of some emerging market economies," it adds.
According to analysts, when it says "richly valued equity markets," it means no one should be surprised if they crash. Gone is the "father knows best" confidence of the IMF amid charges that its remedies often make crises worse. The survey says that the IMF is "planning to streamline and focus conditionality (for its loans) by attaching fewer conditions to its financing.
Programmes should take adequate account of national decision-making processes and be founded on strong country 'ownership' of the economic strategies supported by the IMF.
The survey says bluntly that "good governance is essential to countries' continued prosperity."
"Good governance," it says, "has been found to have a direct impact on economic efficiency and growth, which the IMF promotes as part of its mandate."
Although the IMF has traditionally focussed on encouraging countries to correct macroeconomic imbalances, reduce inflation and implement market reforms, says the IMF, "it has increasingly found that countries must adopt broader institutional reforms if they are to establish and maintain private sector confidence and lay the foundation for durable growth."
The responsibility for governance issues, it points out, lies primarily with the national authorities.
The IMF has contributed to good governance through its policy advice, technical assistance and dissemination of codes and best practices aimed at strengthening institutions and systems and the functioning of markets.
It particularly stresses the importance of eliminating "opportunities for profit-seeking, corruption and fraudulent activity in the way public resources are managed." ( PTI )
http://timesofindia.indiatimes.com/articleshow.asp?art_id=767719373
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