Noting that the world economy is picking up momentum, IMF chief Christine Lagarde has underlined the need to sustain this growth and make it more inclusive. “We are finally seeing the global economy picking up the momentum that we hope is going to be sustained in the medium and longer term,” Lagarde said at a news conference here at the start of the annual Spring Meeting of the International Monetary Fund and the World Bank.
The latest World Economic Report, she noted, has forecasted growth in 2017 at 3.5 per cent and in 2018 at 3.6 per cent. “This is a significant uptick from 2016, which was only at 3.1 per cent, which is all good news,” the IMF Managing Director said.
“But we need to make sure that this momentum is sustained and that we continue to have that growth and more, and, importantly, that the growth is shared more equitably. Looking at the downside, as we always do, there are risks (tilted) to the downside, including political uncertainty. We all remember the green shoots of 2011, which did not last very long,” she said.
Speaking at the Spring Meeting, she said the IMF members will be discussing how they can sustain that momentum; how, irrespective of political cycles, they can make sure that global economy is more resilient; how it is rooted in stronger growth, more inclusive growth and with good cooperation among all.
“Our first priority is to maintain the growth momentum. Using which tools? Well, the traditional fiscal, monetary, structural reform tools that we put together as the three- pronged approach which has to be tailored to each country’s specificity,” Lagarde said.
“Second, and really importantly, we need to reinvigorate productivity, especially by boosting innovation and trade, both which fuel productivity, as is very clearly demonstrated by the recent research paper that we published,” she said. “We need to make that global growth more inclusive. That inclusiveness needs to be identified and supported by policies on three dimensions: within countries, across countries, and between generations,” she said.
More equitable growth within countries means making tax and benefit systems more equitable, boosting high-quality infrastructure investment and mitigating the impact of the structural changes that are taking place, she explained.
Responding to a question, Lagarde said growth is picking up, and there is a momentum underway which they need to sustain with the right short-term policies. “But the growth potential still needs a lot of work. There is clearly a need for policies that will support and encourage and improve productivity. This is one area where clearly policymakers have to focus,” she said.
“Whether they take particular measures to encourage innovation, support research and development by the private sector, participate in basic research themselves, or whether they work on education, skilling and reskilling on a very vast basis, will be obviously for them to decide,” she added.
“But we believe that productivity has to be encouraged and supported so that we can move not just from low mediocre” to less low mediocre, which is how I would characterise our position now, but to not mediocre at all, with the prospect of strong potential growth going forward. That applies to all categories of economies that we are studying,” she said.
She said the IMF is not a trade organisation, but it is concerned about trade because it has been a major engine for growth, and it is actually one of the pillars of prosperity and growth going forward.
“We certainly will be looking at how we can participate in that, how we can continue to support the growth of trade, and how it can be done in the most efficient, fair, and global way as possible. That implies clearly a level playing field, no use of distortive measures, and no protectionist measures going forward,” Lagarde said.