IMF warns of global eco­nomic slow­down

The Guardian Weekly - - Finance - Richard Part­ing­ton

The head of the In­ter­na­tional Mon­e­tary Fund has sounded the alarm over the global econ­omy, warn­ing of an eco­nomic slow­down trig­gered by ris­ing trade pro­tec­tion­ism and soar­ing lev­els of debt.

Chris­tine La­garde used a speech in Wash­ing­ton on Mon­day to drop the broad­est pos­si­ble hint that the IMF would cut its global growth fore­cast when it un­veils its lat­est health check on the world econ­omy next week.

Speak­ing be­fore the fund’s forth­com­ing an­nual meet­ing – tak­ing place next week on the In­done­sian is­land of Bali – she said: “In July, we pro­jected 3.9% global growth for 2018 and 2019. The out­look has since be­come less bright, as you will see from our up­dated fore­cast next week.”

La­garde sug­gested the eco­nomic weather had started chang­ing after the last an­nual meet­ing in Wash­ing­ton at the end of 2017, when much of the world was ex­pe­ri­enc­ing the strong­est pe­riod for eco­nomic growth since the fi­nan­cial cri­sis.

Although there are still bright spots from fall­ing un­em­ploy­ment and the pro­por­tion of the global pop­u­la­tion liv­ing in ex­treme poverty fall­ing to a record low of less than 10%, she said some risks had be­gun to ma­te­ri­alise. Grow­ing use of trade bar­ri­ers, such as higher taxes on for­eign im­ports, has al­ready low­ered the level of im­ports and ex­ports, while there has been an im­pact on busi­ness in­vest­ment and man­u­fac­tur­ing out­put, she said.

“If the cur­rent trade dis­putes were to es­ca­late fur­ther, they could de­liver a shock to a broader range of emerg­ing and de­vel­op­ing economies,” she added.

In a veiled at­tack on the US, where Don­ald Trump has slapped higher im­port tar­iffs on a range of goods, she said na­tions “sail­ing alone” would not help to fix global trade dis­putes. La­garde said: “His­tory shows that, while it is tempt­ing to sail alone, coun­tries must re­sist the siren call of self­suf­fi­ciency – be­cause as the Greek le­gends tell us, that leads to ship­wreck.”

Although the US reached a re­newed deal last week­end on trade with Canada and Mex­ico, in a po­ten­tial boost to the re­gional econ­omy, risks to the global econ­omy re­main from a dis­pute be­tween the US and China.

La­garde also sounded the alarm over fi­nan­cial sta­bil­ity, where the to­tal value of global debt has rock­eted by 60% in the decade since the fi­nan­cial cri­sis to reach an all-time high point of $182tn.

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