IMF chief optimistic on global growth
IMF Managing Director Christine Lagarde did, however, warn against protectionism in a barely veiled reference to US tariff threats, and said the World Trade Organization's rules were in danger of being torn up, threatening global economic growth.
International Monetary Fund chief Christine Lagarde, seen here in a file picture, is optimistic about the world economy but warns that trade protectionism is a threat to that growth.
The International Monetary Fund (IMF) is optimistic on the outlook for global growth but warned darker clouds are looming due to fading fiscal stimulus and rising interest rates, the fund's Managing Director Christine Lagarde said on Wednesday.
In a speech in Hong Kong, Lagarde said the top priorities for the global economy are to steer clear of protectionism, guard against financial risk and foster long-term growth.
The IMF chief was speaking as a trade conflict between the United States and China is creating significant uncertainty for businesses and their global supply chains.
"History shows that import restrictions hurt everyone, especially poorer consumers," Lagarde said, in a barely veiled reference to US President Donald Trump's tariff threats.
"Not only do they lead to more expensive products and more limited choices, but they also prevent trade from playing its essential role in boosting productivity and spreading new technologies."
The best way to tackle global imbalances is to use fiscal tools or structural reforms, she said, adding that the World Trade Organization's rules were in danger of being "torn apart", which would be "an inexcusable, collective policy failure."
Level playing field
Policymakers need to commit to a level playing field and resolve disputes without using exceptional measures, she said.
The reality for 2018 and 2019 was that momentum would eventually slow due to fading fiscal stimulus, rising interest rates and tighter financial conditions, Lagarde said.
New analysis by the IMF showed that global debt had reached an all-time high of $164 trillion, 40 percent higher than in 2007, with China accounting for just over half of that increase.
Lagarde said economies needed to reduce government deficits, strengthen fiscal frameworks and place public debt on a gradual downward path.
"Strengthening financial stability by increasing buffers in corporate and banking sectors is key, especially in large emerging markets such as China and India," she added.
Housing markets in major cities worldwide were increasingly moving in tandem, with Lagarde warning that could amplify any financial and macroeconomic shocks coming from any one country.
The IMF chief was speaking after attending the Boao Forum in China where she said that a global economic recovery was taking root.
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