IMF head La­garde warns of ris­ing threats to global econ­omy

Winnipeg Free Press - - NEWS - MARTIN CRUTSINGER AND PAUL WISE­MAN

WASH­ING­TON — The head of the In­ter­na­tional Mone­tary Fund (IMF) said Thurs­day that a num­ber of threats could de­rail the global eco­nomic re­cov­ery, de­spite signs that 2017 will be the best year for global growth since 2010.

IMF man­ag­ing di­rec­tor Chris­tine La­garde warned that global fi­nan­cial lead­ers must be aware of a num­ber of threats, from grow­ing po­lit­i­cal ten­sions to in­creased skep­ti­cism about the ben­e­fits of glob­al­iza­tion and ris­ing lev­els of in­come in­equal­ity.

La­garde said it will be im­por­tant for fi­nance min­is­ters from the IMF’s 189 mem­ber coun­tries to fo­cus on ad­dress­ing th­ese threats at a time when the global econ­omy ap­pears to fi­nally be in a sus­tained re­cov­ery fol­low­ing the deep re­ces­sion caused by the 2008 fi­nan­cial cri­sis.

“It is not time to be com­pla­cent,” she told re­porters at a news con­fer­ence Thurs­day. “Pol­i­cy­mak­ers can use this mo­ment to pro­vide more cer­tainty and pro­vide for the fu­ture risks.”

La­garde’s warn­ing comes as global fi­nan­cial lead­ers gath­ered in Wash­ing­ton for the an­nual meet­ings of the IMF and its sis­ter lend­ing or­ga­ni­za­tion, the World Bank.

Prior to La­garde’s warn­ing, for­eign fi­nance lead­ers al­ready had raised ques­tions about how the Trump ad­min­is­tra­tion in the United States would pur­sue its “Amer­ica First” poli­cies and whether they would harm the global econ­omy with ris­ing pro­tec­tion­ist trade pres­sures or mar­ket dis­rup­tions from in­creased ten­sions with North Korea and other na­tions.

In ad­di­tion, fi­nance of­fi­cials from the world’s 20 big­gest economies, the Group of 20, were meet­ing Thurs­day and Fri­day to dis­cuss the cur­rent eco­nomic sit­u­a­tion. Trea­sury Sec­re­tary Steven Mnuchin and Fed­eral Re­serve Chair Janet Yellen are rep­re­sent­ing the United States at th­ese dis­cus­sions.

In an up­dated fore­cast pre­pared for th­ese meet­ings, the IMF pro­jected that the global econ­omy will grow 3.6 per cent this year and 3.7 per cent in 2018, putting the world econ­omy on track for its best per­for­mance since 2010.

While the IMF boosted its out­look for the 19-coun­try Eu­ro­zone as well as Ja­pan and China, it trimmed its es­ti­mates slightly for the United States com­pared to the pro­jec­tions it had made in April. It now sees U.S. growth at 2.2 per cent this year and 2.3 per cent next year, still up from the lack­lus­tre 1.5 per cent pace of last year.

IMF econ­o­mists said the re­duc­tion of 0.1 per­cent­age point for 2017 and 0.2 per­cent­age point for 2018 re­flected less cer­tainty over when the Trump ad­min­is­tra­tion will be able to get its tax cut plan through Con­gress. Even be­fore the re­duc­tions, the IMF’s fore­cast was well be­low the three-per-cent growth rates the ad­min­is­tra­tion says will be achieved with its pol­icy changes to taxes, reg­u­la­tion and trade en­force­ment.

A se­nior U.S. Trea­sury of­fi­cial, briefing re­porters on this week’s meet­ings, said the IMF “has other things to do in the world than in­ter­ject it­self into the U.S. tax de­bate.” The of­fi­cial spoke on con­di­tion of anonymity to be able to dis­cuss the U.S. agenda in ad­vance of the meet­ings tak­ing place.

La­garde said that one thing the ma­jor economies will need to han­dle care­fully is the move­ment away from mas­sive eco­nomic sup­port from their cen­tral banks. Such a move, if not well­tele­graphed in ad­vance, could dis­rupt global fi­nan­cial mar­kets and re­duce needed cap­i­tal to de­vel­op­ing coun­tries.

SI­MON DAW­SON / BLOOMBERG FILES

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IMF man­ag­ing di­rec­tor Chris­tine La­garde

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