G20, the governor of the Bank of Italy, Ignazio Visco: "We are not out of trouble yet"

• Trento Economy Festival, Visco: "After the pandemic we need a responsible state"

• Bank of Italy.

  Visco: "Recovery is a formidable challenge, maintaining support for those who lose their jobs"

Share

June 17, 2021 "The risks have become more balanced, but the uncertainty regarding the timing and path of the global recovery remains substantial. We are not out of the woods yet." This was stated by the governor of the Bank of Italy, Ignazio Visco, in the closing speech of the Institute of International Finance G20 Conference.

"The continuing uncertainty - explains Visco - depends not only on health developments, but also on the difficulty of evaluating the changes that have been triggered by the pandemic". For the Governor, "the extent of the economic damage he has inflicted, despite strong political support, will become more evident as these measures are gradually phased out." The imbalances in supply and demand that are particularly marked in some sectors, together with the recovery in commodity prices, "will complicate the assessment of the inflationary outlook for some time".

There is inequality between regions of the world

"The global outlook, although improved, is uneven between regions of the world," added Visco, noting in particular the impact of different pace of vaccination campaigns between advanced and emerging economies. "The fact that today's conference is taking place online reminds us that we are not out of the tunnel yet," he concluded.

Beware of credit and corporate insolvencies

The exit from the pandemic crisis requires "careful action to avoid sudden shocks, first of all at the level of each jurisdiction". "Reducing policy support too soon could threaten recovery" - warned Visco - and "it will be essential to maintain the ability of the financial system to give credit, without compromising its stability. The risk that business insolvencies will rise once that the support measures are withdrawn, must be monitored ".

Food insecurity for millions of people

"The global economy is recovering: the latest OECD projections on world GDP growth have been revised upwards for both this year and next, thanks to continued progress in vaccination campaigns. Cooperation between countries and the coordination between monetary and fiscal authorities set the stage for the recovery, marking a major change of direction. According to the IMF, the global economic contraction last year would have been three times worse without such rapid and global political support. However, the World Bank also warns us of the disproportionate burden on the poorest and most vulnerable countries: the pandemic has exacerbated food insecurity for millions of people ".

Primacy sector is the engine of innovation and work

"The private sector must continue to be the engine of innovation and job creation, helping not only to emerge from the pandemic, but also to build a more sustainable economy in the future, with the fundamental contribution of the financial sector. G20 we will continue our efforts to lay the foundations for a market that works effectively and efficiently. "

No conflict between state and private individuals

"The contrast between the state and the market is misleading, since on the contrary they are complementary: a healthy economy requires both". The state must ensure "good rules and quality public services and must intervene in areas where social returns are high, but private initiative is not enough". For its part, the private sector "generates dynamics and innovative companies, capable of promoting their activity and being rewarded for the quality of their production".

Uncertainty for health developments and post-Covid changes

"Uncertainty depends not only on health developments, but also on the difficulty of measuring the changes triggered by the pandemic." Covid "has caused great dislocations in supply and demand, which are particularly marked in some sectors, together with the recovery in commodity prices, will complicate the assessment of inflationary prospects for some time".

It is necessary to insert crisis lessons in the rules frame

"From now on, regulators and supervisors will focus their attention on completing the remaining elements of the reform agenda, including Basel III, resolution frames and rules of non-bank financial intermediaries. At the same time, they will seek ways to apply the lessons that emerged from the pandemic to operation of the regulatory framework, such as those related to usability of the capital buffers, the role of countercyclical element in prudential regulation and potential sources of pro-cyclicality ''.

digital Currencies

"The G20 will consider issues related to central bank digital currencies and their possible cross-border use." "Their development - added Visco - brings with it a series of technological, legal and economic issues, which deserve careful consideration. The digital currencies of central banks and global stablecoins are closely interconnected: they share a transactional purpose and can be complementary. or replace one with the other ".