SLI: World needs more co-ordinated stimulus

Added 21st November 2016

Politics are the main barrier to broad-reaching - and much needed – infrastructure spending, according to Standard Life Investments (SLI) as it recognises the need for greater fiscal stimulus.

SLI: World needs more co-ordinated stimulus

In the group’s latest global outlook piece, UK and European economist James McCann said as monetary policy around the world looked increasingly stretched, the case for a sustained fiscal push looked even stronger.

SLI has been considering the debt burdens of different countries, the growing need for infrastructure spending, the quality of infrastructure spending, and the cost and ability with which a country can borrow.

McCann said if the political will to increase investment did exist, it would lead to an upside risk to SLI’s forecasts.

“It would also provide a prompt to reconsider the outlook for asset markets,” he said.

“Global interest rates have been pushed to unprecedented lows, with part of the blame falling on weak growth and inflation, excess desired savings and an over-reliance on monetary policy – in particular asset purchase programmes.

“A large co-ordinated stimulus could help boost nominal growth, reduce government saving and create a better balance between monetary and fiscal policy. But where there is no will, we struggle to see a way forward for such an approach.”

He pointed out that only in a selected few economies was there evidence of sufficient political will to loosen fiscal policy, compared to current plans.

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