IMF chief Christine Lagarde today cautioned world leaders against being complacent about economic growth and expressed concern that some developing economies are not sharing the benefits of their growth.
IMF chief Christine Lagarde today cautioned world leaders against being complacent about economic growth and expressed concern that some developing economies are not sharing the benefits of their growth. Without taking any names, she also stressed that one-fifth of emerging and developing economies saw their per capita income decline in 2017. “While the near-term outlook is good, the mid-term outlook is more worrying, and a recession may be nearer than we think,” she said while releasing an update to the IMF’s global economic outlook here at the World Economic Forum. “The level of public debt means that the ammunition to fight another recession is not as strong as before, so world leaders must make sure to adopt the best policies now, and make hay while the sun shines,” she said.
According to the IMF’s latest report, the world economy is gathering speed with growth forecast for 2018 and 2019 pegged at 3.9 per cent even as it warned that the present economic momentum reflects a “confluence of factors” that is unlikely to last for long. The global output is estimated to have grown by 3.7 per cent in 2017, which is 0.1 percentage point faster than projected in the fall and half percentage point higher than in 2016, it noted. The pickup in growth has been broad based, with notable upside surprises in Europe and Asia. Lagarde, also a co-chair for this year’s annual meeting, said global growth has been accelerating since 2016, and all signs point to a continuing strengthening of this growth.
“This is good news and we should feel encouraged, but not satisfied. Because too many people are still left out of this growth. About one-fifth of developing and emerging economies saw their per capita income decline in 2017,” she added. The IMF chief warned that there is uncertainty in the year ahead due to public sector vulnerability and a troubling increase in debt in many countries. “It is when the sun is shining that you want to repair the roof,” Lagarde said, while adding that despite the heavy snow in Davos, now is the time for world leaders to fix their roof.
While urging policy makers to use the current circumstances to make the structural or fiscal reforms that are too hard to make in more difficult times, Lagarde also sought steps to make growth more inclusive, not just across countries but within countries. Further, she pitched for global collaboration to fight corruption, improve conditions for trade, stop tax evasion and prevent catastrophic climate change. The IMF, in its latest outlook, has projected India to grow at 7.4 per cent in 2018 as against China’s 6.8 per cent, making it the fastest growing country among emerging economies.