At the closing panel of the 2020 Money and Banking Conference, President Miguel Pesce stated that the pandemic has deepened the growth problems in the global economy and claimed that the world’s immediate challenge is to find the necessary instruments to boost development in such a complex context. “We need to better understand what is happening in the global economy in order to deal with the issue of growth. We are aware of the challenges and, indeed, we have institutions and instruments to face them. What we need is global consensus,” said Pesce.
The President pointed out that uncertainty makes it harder to foresee problems and even raises new questions. “Even if we overcome the pandemic, there is still doubt whether the global economy will rely on central or Asian countries, specially China and India, as drivers of growth,” stated Pesce. He also referred to the dilemmas faced by central banks in times of crisis. “How much further they can go in expanding their balance sheets? How much further countries can go in increasing their debt without raising doubts among investors? The growth in the value of financial assets is not validated by substantial levels of growth in output. The imbalance between growth and the value of financial assets must be addressed at some point,” stated Pesce.
In addition, Pesce's presentation analyzed income redistribution worldwide. “The world has been undergoing a process of negative income redistribution for decades. This would normally occur in peripheral countries. However, this process has also unfolded in central countries in the past decades. Thus, world economic growth is being affected as domestic consumption is still a major driver of aggregate demand in all central and peripheral economies.”
Moreover, Pesce referred to the importance of regulating investment funds. “Investment funds have turned out to be one of the most important players in the global financial system. So, in the same way banks were regulated in 2008-2009, we should assess if investment funds—now prevailing in the global scenario—are to be regulated, particularly, on account of their impact on peripheral economies.” Lastly, Pesce pointed out that “the volume of inflows and outflows of funds, and the size of economies may cause significant distortions in the value of assets, levels of activity and balance of payments, bearing in mind the pro-cyclical behavior of these economies and worldwide.”
November 25, 2020.