Page 28 - WEF Reoprt 2020

REUTERS/PRASHANT WAYDANDE

rate to a historic low of -0.50% in September has increased every year since the 2008–
2019. The Bank of Japan’s deposit rate 2009 crisis. Researchers from the ECB
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has remained at -0.10% since February analysed four decades worth of data from
2016. Such low rates raise concerns about 17 European countries and concluded that
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the soundness of banking systems. The fiscal stimuli may not be effective when
ECB has warned that decreasing profits are public debt is high. 25
challenging Europe’s banking sector; in the
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second quarter of 2019, European banks At the same time, tax rates have increased
yielded an average return-to-equity of 7.0%, across G20 economies—their average
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compared to 12.1% in the United States. 22 maximum income tax rate has risen by
more than two percentage points since
The role and reach of monetary policies are 2009, to 37.7%. Lowering tax rates could
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also challenged by wider factors such as be a potential stimulus measure, but strong
technological change, climate change and political and social pressure may arise as
rising inequality. Christine Lagarde, President these monies are often used for public
of the ECB, for example, announced a services that attempt to combat inequality.
“strategic review” of the ECB’s mandate to
preserve price stability to “address the major Higher debt and economic stagnation help to
changes that have taken place over the explain why “fiscal crises” are the top-rated
course of the last 16 years”—when the last risk for businesses globally over the next
such review was conducted. 23 10 years—according to our Executive
Opinion Survey. In the current global
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Fiscal constraints context, weak public finances have two
The margin for fiscal stimulus in most of the implications: they jeopardize whatever
world’s main economies has narrowed, as remaining margin governments have to
higher spending has reduced budget coffers. address a recession, and they could
Public debt in 15 of the 20 largest economies aggravate already hard-felt social tensions

The Global Risks Report 2020 23