KUALA LUMPUR: The global economy requires an economic stimulus package worth US$3.7 tril (RM15.76 tril) in order to get back to the growth model as it navigates tempestuous times and uncertainty, says an analyst.
Juwai IQI Global chief economist Shan Saeed said at the start of the year, IQI shared with its clients that macroeconomic stability has come under increased scrutiny in many countries, especially in advanced economies.
He noted that to date, 17 countries have announced a total of US$57 bil in economic stimulus to bolster their economic growth but regarded the figure as minuscule and insignificant, pointing out that the global economy needs a much larger amount to ward off a recession.
As the role of fiscal and monetary policies has become very strategic in these volatile times, “all economies have the same policy levers to spur growth depending on their macroeconomic stability and challenges.
“Monetary policy is the central bank’s domain while fiscal policy remains the government’s jurisdiction,” he added.
Shan, who has more than 19 years of financial market experience in private banking, risk/compliance management, commodity investments, global economy, brand and business strategy. said in the last 12 years central banks have taken sole responsibility in delivering economic outcomes.
“Not out of choice, but investors want central banks to take the centre stage. Advanced economies’ central banks like the Fed, ECB, BOJ and BOE have used QE (quantitative easing) to stimulate growth, but have failed miserably,” he said.
QE has borrowed future growth rates at a huge cost to consumers, he added.
“According to the Juwai IQI market intelligence report, the global economy needs $3.7 trillion to come back to the growth trajectory. We have done our calculations:
Countries/Continents Amount in billions
US US$800
China US$700
Europe US$400
Japan US$200
UK US$300
Asia Pacific US$300
Australia US$100
Africa US$300
South America US$300
GCC US$200
Total US$3.7 tril
According to Shan, governments have to play a huge part in getting economic confidence back into the economic landscape.
“In my view, markets are whistling past the graveyard and getting ready to punish the investors.
“Investors have lost US$15.7 tril in the equity market alone in the first 67 days. Investors are taking refuge by parking funds in the bond asset class where yields are going down,” he added.
He noted that US$17.3 tril worth of global sovereign bonds were traded negative, up from US$10.3 tril in 2016.
“What needs to be done is for central banks and governments to make a joint effort to bring macroeconomic stability to the system.
“It’s always the macroeconomic stability that drives economic growth and confidence in the country’s landscape.
“The role of the government and central banks has become massively important. At the end of the day, strong aggregate demand/consumption drives the GDP calculus,” he contended. – March 12, 2020, Bernama
