The Future of Financial Markets
Davos, Switzerland - The recent signing of a trade deal between the United States and China will be good for the global economy, International Monetary Fund (IMF) Managing Director, Kristalina Georgieva, told delegates attending a session at the World Economic Forum on Wednesday.
Georgieva said the US/China trade deal, with Phase 1 recently signed between the countries, is reflected in the IMF’s outlook for the world economy, which is looking better now than it did a few months ago. She said that Phase 1 has trimmed the global cost, of doing business, to the economy by 0.3%, while an accommodative approach by central banks, and the resultant cutting of interest rates, will add 0.5% to global gross domestic product in 2020.
Looking ahead, Georgieva said the outlook was not so positive for 2020, with global growth expected to come in at 3.3% instead of 3.4% partly due to sluggish growth in India and unrest in some parts of the world.
The US/China trade agreement, however, will bolster global growth, and the situation looks better than it did a few months ago, said Georgieva. She said that the trade slump is finally bottoming out, and activity is now starting to pick up from last year’s unusual figure of 1.4%.
The IMF, Georgieva added, will continue to advocate for countries to unleash the power of trade, which is good for economies and job creation.
Steven Mnuchin, United States Secretary of The Treasury, said the signature of Phase 1 of the trade deal was a “significant” agreement that covers aspects such as purchases and currency. The country has also signed a deal with Mexico, he added.
It’s about free, fair and balanced trade, which will be good for all, said Mnuchin. “The US is the most open market for trade, for investment…We want other people to take down Berlin walls.”
For the next 30 days, the US will focus on implementation of Phase 1 through an implementation office, after which it will start working on Phase 2, for which there currently is no deadline, said Mnuchin. He added that an agreement with the United Kingdom, which is currently exiting the European Union, is a priority for this year. “There are a lot of good things for 2020.”
Sajid Javid, United Kingdom Chancellor of the Exchequer, said that the country’s main priority at the moment is the European Union, as the UK will leave in nine days, but still needs a trade agreement.
Javid said that, in terms of leaving the European Union, the principles have been agreed, but there is still work to be done. He said a trade agreement needed to be in place by year-end and, although the timetable was tight, it could be done.
Javid also said the UK’s near-term economic outlook had improved for the UK, as there has been a lot of positivity following the elections, which saw the Conservative Party sweep to victory, providing political and economic certainty. He added this is one of the most pro-business governments the country has ever seen. “This could be a year of change.”
Axel A. Weber, Chairman of Swiss investment bank and financial services company, UBS Group, said that the UK has enough of a majority to get what it agrees to in Brussels approved at home.