Weidmann: Take advantage of upswing to push ahead with reforms

Bundesbank President Jens Weidmann has spoken out in favour of taking advantage of the good global economic outlook to implement reforms. It is now vital to "take advantage of the current economic upswing to push ahead with structural reforms that put national economies on a path of sustainable, higher growth," he said at a joint press conference with Federal Finance Minister Wolfgang Schäuble on the sidelines of the Annual Meetings of the International Monetary Fund (IMF) and the World Bank in Washington, DC. Against this backdrop, Weidmann pointed out that the IMF had also chosen a very fitting motto for its current policy agenda: "a window of opportunity".

He believes that additional structural reforms are needed, as private and public debt in many countries "continue to remain at record highs," adding that, if no further provisions are made in this regard, there will not be sufficient, vital leeway to allow the next downturn to be counteracted through accommodative fiscal policy, for example. Weidmann stressed that "the reforms should be geared towards increasing the resilience of national economies," noting that this was also the motto of the outgoing German G20 presidency.

New impetus for the global economy

With regard to the global economy, Weidmann emphasised that the situation had continued to improve. He also stated that, with global economic growth of 0.9 per cent, the second quarter of 2017 had been the strongest in a number of years. At the same time, the volume of world trade has continued to rise. "On top of this, the economic upswing is broadly based. The United States and the euro area in particular recorded relatively strong second and third quarters," said Weidmann.

In this context, he referred to the new IMF growth forecasts, which, compared to previous forecasts, anticipate slightly higher global GDP growth of 3.6 per cent and 3.7 per cent for 2017 and 2018 respectively. Weidmann stressed that the IMF’s forecasts for the euro area had also been revised upwards – to 2.1 per cent growth this year and 1.9 per cent next year.

Upswing creating prospects for normalisation of monetary policy

The improved economic momentum is, according to Weidmann, also relevant from a monetary policy perspective. "This has created new prospects for a normalisation of monetary policy," said Weidmann, with particular regard to monetary policy in the Eurosystem, which will make crucial decisions mainly concerning the future of the asset purchase programme at the end of October. He stated that, in terms of monetary policy, it is now a case of "no longer constantly putting our foot down on the accelerator."