ASF 2018: Strained International Relations Could Drive the Global Economy Down

• Borrowing and lending need to end for economy to stabilise
• Investing in infrastructure, education and health are key to moving forward: Jack Lew

Dubai-UAE:– “The main problem is that we are complacent and not paying attention to the signs that indicate possible recession. Ten years ago, we were more aware than we are now. I am not sure if the radar is in the right place in countries that are in debt and this will make the jobs of the Federal (governments) harder than ever,” affirmed Jack Lew, former United States Secretary of the Treasury.

Lew was speaking at a panel discussion titled the ‘State of the World Economy 2019’ at the Arab Strategy Forum, moderated by Manus Cranny, Bloomberg Markets Editor. During the session, Lew and Mervyn Allister King, former Governor of Bank of England and Member of House of Lords, discussed the challenges of Brexit, emphasised the impact of negative geo-political trends morphing the future of the global economy and the dire need to support the global economy.  

The panellists dwelled upon the strain on international relations looming over the future of global economy, reiterating that countries such as the US and China need to come together to put an end to the current political turmoil. Lew expressed his unease over the trade wars and Brexit resulting in trade policies that are sending the “economy in the wrong direction making the conflict real.” Lew also stated that countries like China need to “ascribe to the world’s rules instead of exposing its own rules” for the betterment of the overall economy.

Commenting on the state of Brexit, Lord King stated that the results would have minimal impact on the international economy, but European Union leaders need to focus on bigger issues. “Brexit is important for the UK, not for the rest of the world, and the European Union has bigger problems to focus on. Brexit is a disaster because the political class is unable to cope with the concerns of ordinary people, and this will only influence the UK economy.”

While the experts refused to predict the future of Brexit, they raised the possibility of Brexit being cancelled stating that “anything could happen.”

Further discussing the impact of trade wars on the future of the economy, King deliberated that the US slapping tariffs is not as much of a concern as its timing given the slow growth of economies around the world. He also criticised the US trillion-dollar debt as well as President Donald Trump’s incapability to develop a solution at the G20 conference to deescalate the trade war and drive the country’s economy out of debt. King went on to mention that the US has accumulated a lot of debts and “the more debts, more borrowing” strategy is a short-sighted solution. According to him, this has increased the interest rates and led the banks to believe that countries in debts will not be able to pay back in time, further slowing down the growth of the global economy.

When asked to forecast the future, King said: “We should not put too much weight on forecast but the signs indicate that we are slowing down.” He agreed with Lew that the world is not paying attention to the signs of a possible recession. However, both experts concurred that the economy is volatile and unpredictable, and the strained relations will be responsible for a possible downturn in the economy.

The session ended with a discussion on stability, where the audience asked the experts to provide solutions or comment on stability. King mentioned that an arrangement or agreement on how the markets should function should be put in place for markets to stabilise instead of short-term reactions such as imposing tariffs.

For his part, Lew stated that countries need to discover alternatives to stabilise economy, end trade wars and put a halt on borrowing or lending for the meantime. He added that investing in infrastructure, education and health are critical in moving forward.

-Ends- 

About the Arab Strategy Forum

The Arab Strategy Forum (ASF) is a premier global platform that convenes world leaders and strategic decision-makers from the public and private sector to exchange insights on geopolitical trends that impact the world today. Held under the patronage of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, the annual event features panel discussions and expert-led thought sessions revolving around the state of the world and the state of the Arab world.

Aimed at enabling participants to make informed decisions, navigate risks, and leverage short- and long-term opportunities, the forum analyses the current Arab and global political and economic landscape, examines conflicts and possible resolutions, and highlights events that are set to leave a lasting impact worldwide. 

© Press Release 2018