MANILA, Philippines—Providing full employment must be a top policy goal of central banks, along with low inflation and financial stability, in order to address the worsening global economic outlook, International Labor Organization said.
This is being done “in the United States and Argentina, (and) we know this works,” ILO director general Juan Somavía said in a statement.
“Countries that invested in job creation (and social protection) as a way out of the 2008 crisis fared better than those that prioritized bailing out their banks,” Somavía said.
“China invested in labor-intensive infrastructure projects, [while] Germany’s work-sharing program kept 1.5 million workers employed at the height of the crisis.”
In a report titled Global Employment Trends 2012, ILO called on governments to undertake stimulus spending programs with a focus on job generation.
The ILO, an agency under the United Nations, said that the world economy is under threat from a three-stage crisis.
After governments release their stimulus packages, monetary policy space tends to narrow, making it harder for governments to stop or even slow down further weakening of their respective economies, it said.
Recalling the events of the past three years, the ILO said that the first stage was when governments used coordinated fiscal and monetary stimulus, but which proved insufficient and resulted in higher public deficits and sovereign debt problems.
The second stage is marked by the decline in fiscal stimuli, pushing governments to rely on quantitative easing monetary policies.
Earlier this month, the Bangko Sentral ng Pilipinas said it had room to lower its policy rates should the global economy deteriorate further.
It also said that Malacañang should spend wisely to maximize a “limited policy space.”
BSP Governor Amando M. Tetangco Jr. said that, along with an “appropriate” monetary stance, targeted government spending and the participation of the private sector could ensure that “all engines of growth would fire up.”
“The global growth picture has indeed turned more negative since mid-2011,” Tetangco said. “But if policy makers and the private sector are able to harness these buffers, our country will be able to meet the challenges of 2012 head-on.”
The BSP chief said the government would need to ensure that spending would benefit sectors, leading to more jobs as well as infrastructure projects that would solidify the base for sustained growth.