Lagarde: Growth strengthens but 'wrong' policies may halt it
G20 financial leaders fail to reach a compromise deal to endorse free trade
International Monetary Fund Managing Director Christine Lagarde said on Saturday that global growth was gaining strength, but cautioned that the “wrong” policies “could stop the new momentum in its tracks”.
In a statement issued at the end of a Group of 20 finance ministers and central bank governors, Lagarde called the forum of the world’s top economies a “critical platform for major economies to work together in an established framework”.
“We met at a time when growth is gaining momentum around the world and there are signs that the global economy has reached a turning point, even though uncertainties remain,” Lagarde said.
The world’s financial leaders failed to reach a compromise deal to endorse free trade on Saturday, backtracking on past commitments to keep trade open and reject protectionism, the communique of G20 finance ministers and central bankers showed.
Making only a token reference for the need to strengthen the contribution of trade to the economy, finance ministers and central bank chiefs of the world’s top 20 economies broke with a decade-old tradition of rejecting protectionism and endorsing open trade.
In the new US administration’s biggest clash yet with the international community, G20 finance chiefs also walked back on a pledge to support climate change finance, an anticipated outcome after US President Donald Trump called climate change a “hoax”.
Speaking on the sidelines of the meeting, delegates said that the US was holding out on key issues, unwilling to compromise and essentially torpedoing a deal as it requires all members to sign up.
Trump has already pulled out of a key trade agreement and proposed a new tax on imports arguing that certain trade relationships need to be reworked to make them fairer for US workers.
G20 financial leaders, however, reaffirmed their a commitment to refrain from competitive currency devaluation, a key agreement as the US has repeatedly complained that some of its trade partners are using artificially devalued currencies to gain a trade advantage.
Lagarde’s statement, meanwhile, did not mention the failure of G20 finance officials to reach a compromise deal to endorse free trade. But she said that strong monetary, fiscal and structural economic reform policies were critical to the global economy’s future direction.
“Global cooperation and pursuing the right policies can help achieve strong, sustained, balanced, and inclusive growth, while the wrong ones could stop the new momentum in its tracks,” said Lagarde, who has been a tireless advocate for open trade and more global integration.
Officials at the meeting have raised concerns about what they view as a more protectionist stance of the new US administration of President Donald Trump, which is considering more policies to reduce the flow of imports into the United States.
Lagarde said she reaffirmed the IMF’s readiness to enhance global cooperation, including through “vigorous exchange rate surveillance and analysis of global imbalances”.
She also said the IMF was committed to support its members who may deal with adverse risks from excessive capital flow volatility as the Federal Reserve raises interest rates, which may tighten global financial conditions.
She also said she welcomed proposed agreements between G20 countries to build financial capacity and unlock investment flows.
Meanwhile, French Finance Minister Michel Sapin said he regretted that a meeting had failed to reach satisfactory conclusions on climate change and trade.