“The greatest drag to the global economy is actually coming from the Euro area and, in part, it’s having to do with necessary and important fiscal adjustment issues there,” he said.
But Dennis said that heated debate over whether to raise the U.S. debt ceiling has already affected economic growth in the United States and developing countries. The debt ceiling must be raised for the U.S. government to pay its bills. If it’s not, the U.S. defaults and that can deal a major blow to its financial standing and credit rating. Nevertheless, it’s a bargaining chip in budget talks.
“Our assumption is that the authorities will come to some settlement of some sort. Within our baseline projections we don’t assume a severe fiscal adjustment or contraction in the United States. So, in other words, we assume that it’s going to be extended over a longer period of time, rather than everything being done within a short period,” he said.
During the last four years, developing countries, especially those in sub-Saharan Africa, have been the economic bright spot. They’ve demonstrated resilience to much of the turmoil. The World Bank says it’s because of the fiscal and monetary policies they’ve put in place.
However, those policies are short-term solutions. Dennis said that certain structural policies must be implemented for the long-term. They’re needed, he said, to sustain growth and make developing countries more competitive in a global economy.
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2013-11-25
2013-11-25
2013-11-25
2013-11-25
2013-11-25
2013-11-25