The State of the Economy

Summary – the state of the economy (video day 1_4)

This conference began with the participation of the economic adviser and Head of Research of the World Bank Hyun Song Shin, who exposed the tensions that have caused the strengthening of the dollar in the financial markets and the global banking system, because it puts pressure on the economies of emerging countries and also in the best positioned currencies as the Swiss franc and the Japanese yen. In addition, He argued that the intense connection of the world has figured more and more in the speeches of the central bankers, because the real economy seems to dance to the pace of global financial evolution, not the other way around. Causing that the IPC to be destroyed during the high financial crises and that the size of the fluctuated deviations would consolidate a stronger dollar.

This fact can cause uncertainty because the other currencies in the market tend to are depreciate and when this happens, banks lend less or even reduce the dollar loan plan. In this sense, the value of the dollar is a barometer for risk taking and global credit conditions. On the other hand, based on World Bank statistics, Hyun Song considers that capital flows remain the financial counterpart of savings and investment decisions and the exchange rates are the automatic stabilizers.

Allowing non-financial corporations to be deeply rooted in the economy, and that financial activities extend to the rest of the economy, generating dollar-denominated loans spilling over into the rest of the economy in the form of easier credit conditions. However, even if a country has large foreign exchange reserves, the business sector itself may find itself short of financial resources and can cut investments and reduce operations, leading to a slowdown in global economic growth.

Finally, all these statements show that international financial events have to be placed in the broader context of stand and anticipated actions of the World Bank, in order to have more opportunities to discuss these issues in political circles and readjust the circumstances that do not allow the economic growth of the countries in emergency and the positive development of the international market.