Washington [US], June 28: While the global economy has faced shocks and trade turmoil, globalisation is not dead it is simply being "transformed," the International Monetary Fund's chief economist told AFP Friday in an exclusive interview.
The world's lender of last resort will release an update to its World Economic Outlook on July 8, with all eyes on whether or how far it revises down growth estimates from its April update due to the economic fallout of the US-Zionist entity war on Iran. By then, however, Chief Economist Pierre-Olivier Gourinchas will have moved on after completing a four-and-a-half year tenure that saw the IMF grapple with the economic fallout from the COVID-19 pandemic, Russia's invasion of Ukraine, Washington's upending of global trade through tariffs and the recent war on Iran.
Reflecting on a tumultuous time for the world economy, Gourinchas remains confident that recent upheaval in global trade caused by US President Donald Trump's tariffs are not necessarily ending globalisation just adjusting certain bilateral relationships.
"Well, it's certainly not dead," he told AFP in his office at the IMF's headquarters in Washington, pointing to solid global trade-to-GDP ratios. "We haven't experienced de-globalization," he said. "We have experienced (that) it's being transformed." Gourinchas, a 57-year-old Frenchman, said the latest movements should be seen mainly as "a desire to reduce the bilateral level of trade between the US and China. I don't think that is something that is a mystery for anyone." Since returning to office for a second term, Trump has targeted US friends and foes alike with punishing tariffs, saying he intends to rebase manufacturing to the homeland and to address what he terms unfair trade practices.
Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer have described globalisation as having taken economic integration too far, causing economic pain for American households while benefiting those abroad. For Gourinchas, however, the latest trade turmoil which has seen major US trading partners retaliate with tariffs of their own-has provided opportunities, too. "Other actors have stepped in," he said. "The supply chains have adapted, the Mexico's, the Vietnam's of the world have stepped in... the connector countries that have been able to grow on the back of this." Still, it depends on how far Washington and other advanced economies push this fragmentation of the global economy, he said.
"If the strategy is not just to disengage from China, but it's to disengage more globally which I don't think it is, by the way I don't think it's sustainable," he said. He is skeptical, too, on whether the drive to move industries to the United States will end up boosting employment, saying it is "very, very hard" to see that happening. New factories in advanced economies are expected to rely heavily on technology and employ fewer workers.
For the world's emerging market countries, there is another challenge in a fragmenting world economy: What will drive their own growth, if not demand from larger economies? The last decade has seen growth in developing countries stall, with the World Bank's Chief Economist Indermit Gill referring to it as a "lost decade" for many. Gourinchas said that emerging economies had shown remarkable resilience through the shocks of the last five years, mainly due to greater supply-chain integration but that resilience was not infinite."There is this concern about potentially having a middle-income trap for many emerging market economies," he said, pointing to limited sources of growth in a world where advanced economies were turning inwards.
Source: Qatar Tribune