The great challenges for the global economy are creating jobs and coping with the escalating price of food, leaders of the top international economic organizations said Thursday as the world’s top finance officials descended on Washington for a series of meetings.
Finance ministers and central bankers from most of the nations of the world will be in town for the spring meetings of the International Monetary Fund and the World Bank this weekend. On Friday, leaders of 20 major world economies will hold their own gathering. This set of meetings lacks the high-stakes drama of some others in recent years but could bring quiet and gradual progress on a range of issues, most notably reshaping the world economy to make it less vulnerable to financial shocks.
It takes place against the backdrop of a global economy that is expanding unevenly, with economies in China and many other developing nations overheating while the United States and much of the rest of the developed world are in continued dire straits. And the divide is occurring alongside global turmoil — the Middle East experiencing political upheaval, Japan recovering from a massive disaster and Europe limping through a debt crisis in several countries.
“It would be too much to say it is a jobless recovery, but it is certainly a recovery with not enough jobs,” Dominique Strauss-Kahn, the managing director of the IMF, said in a news conference, describing inadequate employment opportunities as the driver of political turmoil in the Middle East. “So the question now is jobs, jobs, jobs.”
The IMF forecasts that the world economy will grow about 4.5 percent this year, compared with 5 percent in 2010. Strauss-Kahn added that world leaders need to beware of assuming that the economy is on solid footing, because many risks remain.
“The biggest risk will be complacency,” Strauss-Kahn said.
Poorer countries face a more immediate problem, said World Bank President Robert B. Zoellick: a 36 percent rise in food prices over the past year. He called food inflation “the biggest threat to the poor around the world.”
Start with high inflation, Zoellick said, “mix in price gyrations, and then stir in higher fuel costs, and you get a toxic brew of real pain contributing to social unrest.”
On Friday, the Group of 20 finance ministers are set to gather to develop a joint statement on the challenges facing the world. The biggest topic of discussion will probably be how to guide the world economy toward a more balanced state, such that there are smaller gaps between how much a country saves and earns and how much it consumes and invests.
For that to happen, countries such as China and Germany that run a current account surplus will need to consume more and save less, while the United States will need to spend less and save more.
While there are unlikely to be any sweeping breakthroughs on the topic, the Group of 20 is looking to reach agreement on the criteria or guidelines that will be used to assess whether a country is contributing to global imbalances and, thus, needs to adjust its policies, such as budget deficits and trade deficits.
It will take longer to actually identify countries that need to rein in their practices.