By Tengku Noor Shamsiah Tengku Abdullah
KUALA LUMPUR, Mar 12 (NNN-BERNAMA) — The global economy requires an economic stimulus package worth US$3.7 trillion 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.
Sharing his insights on how to get the global macro economy out of the current slowdown in an exclusive interview with Bernama TV on Wednesday, Shan said to date, 17 countries have announced a total of US$57 billion in economic stimulus to bolster their economic growth.
He said the figure is minuscule and insignificant, pointing out that the global economy needs a much larger amount to ward off a recession.
Shan said 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 said.
Shan, who has more than 19 years of solid 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 centre stage. Advanced economies’ central banks like the Fed, the ECB, the BOJ and the 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 said.
“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 billion
USA $800
China $700
Europe $400
Japan $200
UK $300
Asia Pacific $300
Australia $100
Africa $300
South America $300
GCC $200
Total $3.7 trillion
Sources: IQI Strategic market intelligence, Economist, Financial Times, Wall Street Journal, country reports, CNBC
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 trillion 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 said.
He noted that US$17.3 trillion worth of global sovereign bonds were traded negative, up from US$10.3 trillion 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 added.
— NNN-BERNAMA
