As global trade tensions and trade wars continue to escalate and their damaging impact on the global economy is becoming increasingly more evident, policy makers must put collective efforts in order to avoid further deterioration of the economic outlook. Vitas Vasiliauskas, Chairman of the Board of the Bank of Lithuania, shed light on this issue at the Toronto Global Forum held in Canada on 4-6 September. Each year, the event gathers nearly 3,000 participants from all over the world.
“With trade war drums beating loudly, there are no safe havens left. In such an environment, small and open economies become particularly vulnerable. And this is exactly the case with the Lithuanian economy which is sensitive to international tensions,” said Vitas Vasiliauskas. The Chairman emphasized that while it is extremely difficult to forecast future trade relations between the major economies, with trade wars taking new forms the adverse impact of the continuing frictions on the global economy may become even more prominent.
Such sentiments are also supported by international institutions which have been publishing increasingly pessimistic projections since 2018. The International Monetary Fund revised this year’s global growth outlook downwards for the fourth time in a row – it is currently projected at 3.2% (0.4 percentage points lower than a year ago).
“With China’s economic growth reaching its lowest level in recent decades and Germany standing on the verge of a technical recession, it becomes evident that we have to prepare for potential shocks, i.e. to adhere to responsible economic and fiscal policies and accumulate financial buffers,” said Vitas Vasiliauskas. He also noted that extreme financial vigilance at all levels will be of key importance this autumn – both in terms of forming corporate, municipal and state budgets as well as planning family expenses.
The Chairman of the Board of the Bank of Lithuania noted that maintaining the multilateral world order is of particular importance to Lithuania as it helps ensure stability in economies open to international trade. One of the possible ways to safeguard the international system is to reform the World Trade Organisation in order to strengthen its capacity in ensuring compliance to international trade rules.
The Toronto World Forum has been organised annually since 2007. The event brings together high-level officials from state institutions and central banks, CEOs of major international companies, representatives of non-governmental organisations, academic community and civil society. The forum provides a platform for cross sectoral meetings and discussion on global economic challenges and opportunities.
Vitas Vasiliauskas will also take part in a discussion on fintech development where he will present Lithuania’s experience in applying innovative regulatory practices to foster competition in the financial sector.