Azerbaijan, Baku, 2 December/ Trend , corr A. Badalova/ Measures taken worldwide to eliminate impact of a global financial crisis will not yield immediate and efficient results, western experts say.
James Wilson, director-founder of the EU Ukraine Business Council, says 2009 will be difficult year for businessmen. President Obama's Administration will also need time for any stimulus package to have an impact on the US economy.
"It would be wrong to anticipate a quick fix. We should use
this time to prepare for recovery and
be ready to take advantage opportunities in 2010," Wilson said.
Julian Jessop, Chief International Economist at the UK Capital Economics, Independent Macroeconomic Research Consultancy, governments across the world have announced tax cuts and spending increases in an attempt to prevent global recession from turning into a prolonged depression. However, the measures still fall well short.
This month the International Monetary Fund (IMF) called on governments to cut tax burden at least by 2% of GDP in an attempt to eliminate impact of the global financial crisis. China also announced package of measures to stimulate economy according to which state expenditures will increase by 6% of GDP in 2009 and 2010.
World economy is going to experience the worst recession since 1930s, Jessop said via e-mail.
Since the beginning of the crisis, losses and deductions of financial companies totaled to nearly $3trln all over the world. According to IMF forecast, worldwide losses of financial enterprises and banks can increase to $1.4trln.
Governments now need to act as borrowers on behalf of households and firms that are temporarily unable or unwilling to do so. What's more, conventional monetary policy is less effective when the financial system is frozen," Jessop said.
The US fiscal stimulus earlier this year - comprising tax cuts worth some 1.1% of GDP - was not of course enough to prevent the economy from continuing to deteriorate. An additional fiscal package by Obama worth up to $500bn (around 3.5% of GDP) would not be unprecedented, economist noted.
Obama's plans to prevent global financial crisis in US includes maintaining and creating 2.5mln jobs and tax cuts for medium class of Americans.
Two fiscal stimulus packages worth a total of 3.4% were implemented between 2001 and 2002, and a tax cutting package worth 3.6% of GDP was implemented in 1975 helped the US economy to recover from conventional downturns.
"The same stimulus again this time may not be sufficient given the much deeper structural problems," Jessop added.
The European Commission has called for a more modest Europe-wide stimulus of 1.5% of GDP, but the plans of individual countries fall short even of that target, he said.
Plan of the European Commission targeted at eliminating impact of recession in several European countries costs about €200bln and covers two years. According to the plan, 27 European governments must increase expenditures to stimulate economic growth and confidence of consumers and companies. Short-term measures will aim at stimulating supply and maintaining jobs. About $170bln will be allocated by the national budgets and remaining $30bln by the EU budget and European Investment Bank.
The global loosening in fiscal policy is a step in the right direction, but there is still a lot
more work to be done, Jesspo said.
The correspondent can be contacted at: с[email protected]