WASHINGTON - Ask any finance minister or central bank governor of the leading risks for the global economy, and you get a single answer to all: politics.
From the US elections, the exit of Britain from the European Union and shaky recovery of economic growth in China ... Economists around the world are becoming increasingly concerned about the policy, which has a negative impact on global economic growth, inhibiting the growth of investments and fueling market volatility.
The uncertainty of the results of the upcoming elections, referenda, and personnel changes in the government already appear to have had a negative impact on economic activity around the globe.
Uncertainty about how the economic policy will be implemented in the coming years, the dominant issue for the finance ministers and central bank governors.
"The uncertainty and risks facing the global economy, increased as some major economies entered into the election season," said Minister of Finance of China and chairman of the G-20 this year.
Political problems are pushing the global economy into record debt, and the vulnerability of banks to delay economic growth. Leading politicians of the world say that the weak growth in the world economy caused by the creation of a political environment that regenerates protectionism.
IMF warns of a dangerous cycle of development: weaker growth generated by protectionism, may cause more severe response against the trade, which will further slow down production.
Trying to assess the potential impact, the IMF suggests that the sharp increase in tariffs and other trade barriers may raise import prices on a global scale by 10%. And over the next five years, world exports is forecast to fall by 15%. Consumption will be reduced by 2%.
The worst-case scenario of the IMF even more awesome. Financial markets could react negatively to a surge of protectionism. Projected to decline to 18% of investments in some countries, and production worldwide will fall by 3 to 6 percentage points. Many countries will go into deflation, the fund reported.
Investors are concerned about the release of the UK from the EU, predicting a complex process that will extend over the next three years. The process of leaving the EU is one of the biggest threats to the region's economy.
Elections in Germany and France raised the question about the future of economic policy in the two largest economies of the world, as the rating right parties gaining momentum. Italy threatens the constitutional referendum in December. Many economists say that it will be crucial to the restructuring of the economy.
US policy was reflected in the Mexican economy. Mexican peso sharply reacted to the political fortunes of the Republican candidate Donald Trump.
Investors are also cautiously watching the economy of China. Beijing seeks to implement long-promised plan to liberalize its economy until until after the period of the reshuffle, which starts next year. This delay contributes to the accumulation of credits and excess production capacity, which affects the world prices for raw materials.Failure to accelerate the pace of reform may lead to a financial crisis and slower growth in the second largest economy in the world.
Based on materials WELTRADE
