IMF: Global recovery is too slow
washington — The global recovery is facing growing risks, and frustration with inequality is increasing the lure of protectionism, International Monetary Fund (IMF) managing director Christine Lagarde said.
The world economy’s outlook has dimmed over the last six months, exacerbated by China’s slowdown, lower commodity prices and the risk of financial tightening in many countries, Lagarde said on Tuesday in the prepared text of a speech in Frankfurt. The expected passing of the “growth baton” from emerging markets to advanced economies hasn’t occurred, she added.
Lagarde used the opportunity to caution against being drawn to the kinds of forces that have fuelled the populism-driven candidacies of Bernie Sanders and Donald Trump in the US presidential election. While inequality has been declining on a global scale, the perception remains that “the cards are stacked against the common man — and woman — in favour of elites,” said Lagarde.
“To some, the answer is to look inward, to somehow unwind these linkages, to close borders and retreat into protectionism,” she said. “As history has told us — time and again — this would be a tragic course.”
No crisis
“The good news is that the recovery continues; we have growth; we are not in a crisis,” Lagarde said. “The not-so-good news is that the recovery remains too slow, too fragile, and risks to its durability are increasing.”
Lagarde said US growth is flat due partly to the strong dollar, while low investment and high unemployment are weighing on growth in the euro zone. Growth and inflation in Japan have been weaker than expected.
Lagarde said that downturns in Brazil and Russia have been worse than expected.
“We have made much progress since the great financial crisis,” Lagarde said. “But because growth has been too low for too long, too many people are simply not feeling it.”