TOKYO (Nikkei)--The imbalances in the world economy are likely to worsen dramatically in the coming years, with the International Monetary Fund predicting a record-high Chinese current-account surplus in 2012 versus a 70% bulge in America's deficit over the next five years.
Such distortions could end up unleashing capital waves and incurring other risks to stability. Widening imbalances have been blamed as an underlying cause of the 2008 financial crisis.
The global economic slowdown since has shrunk current-account deficits and surpluses alike, but the IMF warns that the trend will go into reverse this year. In particular, surplus king China and the U.S., which runs the biggest deficit, will move rapidly apart.
China's current-account surplus will climb to around 454.6 billion dollars next year and reach three times its 2009 level by 2016, the IMF predicts. The Chinese economy depends heavily on exports for economic growth, with consumer spending equal to only about 35% of gross domestic product. It remains years away from the kind of consumer-driven growth managed by the U.S. and Japan, where consumers spend the equivalent of 60-70% of GDP.
The undervalued yuan also works to expand China's surplus. The currency's appreciation against the dollar has slowed to a 5% annualized rate since last summer from the pre-crisis pace of more than 7%.
The U.S., on the other hand, is projected to see its current-account deficit grow by a factor of 1.7 over the next five years as the country continues to borrow heavily from abroad to offset budget shortfalls. High oil prices will exacerbate an already bad position for big petroleum importers with burgeoning deficits like the U.S.
Japan's current-account surplus looks likely to narrow, with higher resources prices siphoning more money abroad even as the earthquake aftermath slams the brakes on exports in the short term, according to the IMF.
Group of 20 finance ministers and central bankers meeting in Washington this week are supposed to flesh out a mutual assessment process to monitor imbalances in "systemically important countries" and recommend remedial policies. Western nations and Japan aim to bring China and other emerging powers into this circle. The G-20 will be tested on its ability to take effective action against imbalances.
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