remarks by javier guzman calafell, deputy governor at the banco de mexico, on “ attacks of tariffs : what about currencies? ”. euro50 group & cigi meeting. bali, october 12, 2018. 1 i thank the organizers, and especially nina massis and edmond alphandery, for the invitation to join you in this event. ten years after the outbreak of the financial crisis, the global economic recovery appears to have peaked, with gdp growth rates for this and the next couple of years projected to stabilize at levels similar to those recorded in 2017, and to decline subsequently to a less vigorous pace in line with lower potential rates of growth in many economies. further to the envisaged loss of momentum going forward, a number of remaining legacies, as well as new perils, continue to tilt the balance of risks for the outlook to the downside. chief among the latter is the rising trend of protectionism, evidenced by more restrictive trade policy stances, both actual and intended, in a number of countries, leading in turn to heightened tensions or outright conflict between governments. of course, the specific nature and extent of these tensions is varied and broad - ranging, and while there has been some relief in virtue of progress achieved in some particular cases, such as the recently announced agreements in the north america region and between the united states and korea, ongoing hostilities in other fronts remain a major source of concern. of particular note is the clash between china and the united states, which is widely regarded as the one with the potentially direst consequences, not only for the economies directly involved but, also, globally. in fact, the performance the views and opinions expressed in this document are the sole responsibility of the author and do not necessarily represent the institutional position of the banco de mexico or of its board of governors as a whole. throughout this year of a number of variables points to the effects that such a situation may already be exerting on the world economy. for instance, international trade volumes have notably slowed down relative to the upward trend they had displayed since 2015, while other indicators on the output side, such as export orders in global manufacturing pmis, sentiment indexes for trade oriented sectors, and capital goods orders in some of the main economies, are showing a declining trajectory that, if sustained, would eventually be reflected in international trade figures. why is such a potential setback in global openness to trade so worrisome? naturally, the complexities of the trade

, it is not the right time to raise its savings ratio at this very moment. it needs to strike a balance between stimulating consumption and facilitating the economic recovery. on the other hand, the east asian nations should attend to economic growth model, economic structure, price system and the like, in order to bring down savings ratio. of course, reform of the exchange rate mechanism is part of this prescription. the chinese government has focused on boosting domestic demand to sustain economic growth in an effort to tackle the ongoing financial crisis and conducting economic adjustment. the rmb 4 - trillion yuan stimulus package, one of the largest in the world, is mainly an expenditure program. the program underscores public welfare, job creation, and income growth for the rural areas and the underprivileged groups. second, countries and international organizations should strengthen their cooperation and intensify the regulation of the international speculative capital flows. the current financial crisis underscores the necessity of reinforcing the regulation over international capital flows and enhancing their transparency. international organizations and countries concerned should help developing countries to establish a robust early - warning system and guard against attacks from predatory speculation. international cooperation should be strengthened to improve the aid mechanism. in case emerging markets experience temporary bop difficulties, international aid should be swift, and conditionalities attached should be reduced. this would encourage countries to lower savings including foreign reserves and expand domestic demand. third, appropriate measures should be taken to channel more savings into developing countries and emerging markets. savings flowing from emerging markets to the advanced economies is neither rational nor consistent with the intention of the advanced economies to increase their domestic savings. however, the adjustment of savings ratio in the east asian countries will not see immediate effects. meanwhile, savings in oil - producing countries may remain at a high level so long as oil prices don ’ t plunge further. therefore, global savings imbalance will remain for some time in the future. the top priority at present is to facilitate the rational flow of savings and improve their allocation efficiency. one option is to redirect surplus savings to other developing countries and emerging markets, those with abundant resources, low labor cost, but lack of capital. these economies are the future growth engines of the global economy. finally, the reform of the international monetary system should be advanced. currently, u. s. dollar is used in most international trade and financial transactions, and is also the most important reserve currency. the imf data showed that the u. s. dollar accounted for 63.