Chinese Premier Li Keqiang attends a session of the World Economic Forum (WEF) annual meeting on January 21, 2015 in Davos. (AFP Photo/Febrice Coffrini)

The New Normal: Slower Global Economic Growth


JANUARY 23, 2015

Davos. World leaders and heads of corporations gathered for the 45th World Economic Forum Annual Meeting have one major issue on their mind: how to deal with a slowing global economy.

Chinese Premier Li Keqiang warned attendants on Thursday that China would no longer be able to post double-digit economic growth in the future. Instead, he noted, the Chinese government would focus on structural reforms.

“Many people are worried about the outlook for the Chinese economy. It has entered a new normal of medium, high growth, and the moderation of economic growth in China reflects the global environment,” he said.

He added that the Chinese economy will continue to face downward pressure going forward, but he assured the audience that China will not face an economic crisis.  “We can shift gear without disruption, but we need to make reforms and innovation as the new drives of economic growth.”

His message was echoed by other leaders, including German Chancellor Angela Merkel, who called for urgent fiscal reform in Europe.

Emerging economies — which, in the post-2008 global financial crisis era, were the major engine of global economic growth — are now facing new challenges. China has accepted the new normal of slower economic growth, while Russia, India and Brazil are also struggling with domestic difficulties.

“If you look at the year ahead, there is so much uncertainty,” said John Riady, a director of Lippo Group and co-chair of World Economic Forum East Asia, which will be held in Jakarta in April. “The theme for Asian emerging markets is adjusting to the new normal.”

He added that many countries were seeing slower economic growth due to the decline in commodity prices.

Another major theme for 2015 will be volatile currencies. “Those currencies which are strong, such as the US dollar will grow stronger while those that are weaker will be punished,” John said.

For Indonesia, the single biggest issue was dealing with the budget deficit and fuel subsidies. President Joko Widodo has moved rapidly to deal with both issues.

Chief economics minister Sofyan Djalil told GlobeAsia that the new government believes in good policy even if the policy is unpopular. He was also receptive to the global investor community as he met the heads of some of the largest mining and metals companies in the world.

“This is the mind-set of the new government,” he said. “We are here to do business and work for the people of Indonesia.”

Lippo Group is affiliated with GlobeAsia.