IMF’s Lagarde Warns the Global Economic Recovery Isn’t Complete

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By Enda Curran and Andrew Mayeda

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  • Says the goal is turning growth unity to ‘a season of action’
  • Threats include the risk of volatile capital markets, she says

Policy makers need to use the world economy’s best performance in a decade to push through reforms that will defuse political tensions and make the expansion sustainable, Christine Lagarde, managing director of the International Monetary Fund, warned.

Citing the poet Percy Bysshe Shelley, Lagarde said there is a “degree of harmony” in global growth but cautioned that economic aspirations are being limited by a lack of economic reforms amid growing disruption from the impact of technology and other changes.

“Our goal is turning that harmony we see into a season of action,” Lagarde told reporters Thursday in Washington. “The recovery is not complete.”

Threats include the risk of volatile capital markets and tighter financial conditions with spillover consequences around the world. Disruption from new technology is also on the worry list, and Lagarde again urged for a resistance towards protectionism that could disrupt a trade revival.

“This pickup in trade that we see is good for growth and we need to secure it and make sure it continues to be so,” Lagarde said. “Trying to reduce trade would not be helpful for that roof we want to fix.”

Lagarde made the remarks as finance ministers and central bankers from the IMF’s 189 member nations meet this week in the U.S. capital for the fund’s annual meetings. The IMF is pushing reforms that include investment in education, a strengthening of safety nets and infrastructure spending.

The Washington-based lender this week lifted its growth outlook for the U.S., the euro area, Japan and China from its last forecast in July. The recovery spans roughly 75 percent of world output, according to the IMF. The fund projects the global economy will grow 3.6 percent this year and 3.7 percent next, in both cases an increase of 0.1 percentage point from its previous estimate.

The recovery is being driven by investment, consumption and trade, Lagarde said. “It is not time to be complacent it is time to take those policy decisions that will enable more people and more countries benefit form the recovery.”

Source: Bloomberg

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