Tailored Structural Reforms Key To Boost Productivity - IMF Official

KUALA LUMPUR, July 25 (Bernama) -- Well-sequenced and tailored structural reforms are needed in all countries to boost productivity and investment, said International Monetary Fund (IMF) Economic Counsellor Maurice Obstfeld. He said this is on the backdrop of the subdued medium-term outlook for advanced economies and commodity exporters. “Fiscal policy should support growth and potential output, as well as being inclusive,” he told a briefing on the “World Economic Outlook Update” here Monday. Emphasising on the continuation of an accommodative monetary policy or data dependent monetary normalisation, he said, “Implement comprehensive policies with strong policy frameworks.” Obstfeld said Malaysia was in a favourable position with strong balance and there was room for further strengthening of safety net and transition to the digital economy and higher-income economy. However, he said education and up-skilling to move into the knowledge based advance economy needed to be addressed effectively. Asserting the need to build up financial sector resilience and rein in leverage and lower financial risks, he warned that tightening financial conditions globally might trigger spillovers to emerging markets. "While risks balanced in the near term with stronger and more sustained cyclical growth momentum in Europe, where political risks has diminished, downside risks are skewed in the medium term,” he added. Obstfeld attributed the downside risks to markets that may push central banks towards too rapid tightening and escalation of inward looking policies. "In this respect, continue structural and fiscal reform, balance sheet repair, improvements in the financial stability framework,” he emphasised. "Exchange rate flexibility aids macroeconomic adjustments, but beware of inflation and currency mismatches. "Global recovery is on track but the composition is changing as downward revisions in the US and the UK are offset by positive revisions in emerging markets, Euro Area and Japan,” he said. The IMF maintains its projection for the global economy at 3.5 per cent for 2017 and 3.6 per cent for 2018. It is revising a higher growth projection for emerging market and developing economies for 2017 at 4.6 per cent and maintaining a projection of 4.8 per cent growth in 2018. -- BERNAMA