Interview, Conference Presentation
Former IMF chief economist Gita Gopinath’s warning for rich world economies
- Emerging market policymaking has matured to become "somewhat less reliant" on U.S. advocacy, yet financial market turbulence in the U.S. remains a potential future event capable of causing consequences for emerging markets "much bigger" than previous crises.
- Non-bank financial institutions are playing a larger role in corporate lending, creating a concern that the world has not yet experienced a significant crisis involving this sector, leaving it untested.
- A structural disconnect between expected government spending levels and collected revenue makes fiscal policies "very difficult to roll back" following temporary increases, requiring governments to find a way to address budget imbalances.
- Spending associated with aging in advanced economies, specifically on health and retirement, is on an "unsustainable trajectory" as life expectancy has risen by "about four and a half years over the last few decades," creating pressure to raise the retirement age.
- Global debt-to-GDP is forecasted to reach "about over 100% of GDP by 2030," with more advanced economies such as France and the U.K. facing "day-to-day issues" regarding debt sustainability rather than ignoring the problem.
- Fixing the fiscal problem for rich nations requires addressing "entitlement spending," otherwise tax increases will be "extremely large."
- In France, a "pause at least" is expected regarding the planned increase of the retirement age to 64, yet sustaining current fiscal paths is deemed "not possible" if the retirement age fails to increase to that level.