GLOBAL FINANCE CRISIS IN THE 10TH YEAR*
Growth rates after the global financial crisis indicate that the effects of the financial crisis have been reduced but not fully eliminated. According to the IMF’s World Economic Outlook Report, the average growth rate was 5.2% in 2006-2007 before the global financial crisis. Currently for 2018, the estimated value is 3.7%. In the aftermath of the financial crisis, both developed countries and developing countries have made important attempts to reduce the effects of the crisis. As a result of the global financial crisis, surveillance / control increased and risks were minimized. Thus, the effects of the financial crisis could be reduced to some extent. However, the developed economies (US, Euro Zone, UK and Japan) failed to achieve the desired growth. Similarly, the growth rate in China, which is considered to be the growth engine of the world economy, has been falling since the crisis. Recently, the growth rate in India can be expected to a decrease as in China. Moreover, the global imbalance, which is among the causes of the financial crisis, has continued. While the current account deficit of the US is lower than the global financial crisis, it still remains at high levels. The UK’s current account deficit has increased compared to the financial crisis.
In Middle East countries and Turkey, current account deficit has increased compared to pre-crisis level. In contrast, China, Germany, Russia and Italy are among the surplus economies. Italy was able to convert its current account deficit to current account surplus. However, Italy is currently facing a public debt burden exceeding 130% of GDP. In other words, while production, investment and employment increase continue in some of the world economies, the other part is fighting high unemployment and debt burden. This will have a cost. Income and welfare inequality are increasing, unemployment is becoming widespread in Europe, especially among young people. Production capacities are falling, pressures on the budget are increasing. All this is combined with geopolitical, political and social factors and a vicious circle has been introduced. We are beginning to see customs wars and exchange rate wars in the world economy.
All these factors are increasing the likelihood of a new financial crisis. In fact, there is always the possibility of a financial crisis. However, the impact of the financial crisis may not be as much experienced as in the past. Developed countries and developing countries experienced the crisis in a negative way, and they took the necessary measures and supervision. In particular, audits on financial institutions were increased. But the risks were transferred to new institutions. Here, perhaps, non-bank institutions can be said to be new risk groups. The supervision on these institutions is not as much as the banks. The blood circulation between the real sector and the financial sector could not be fully strengthened. Problems are been trying to solve with check up. Improving the effectiveness of risk management practices will be one of the best solutions for reducing global imbalance and preventing the financial crisis. Increasing global trade will also support production and employment. The leverage effect of e-commerce on this issue is incontrovertible. Above all, global co-operation should continue to be strengthened in a coordinated manner.
*(published in Derinekonomi, November, 2018)