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Global growth and job creation ‘simply not good enough’, IMF chief says
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Christine Lagarde, the managing director of the IMF, warned that the global economy risked having mediocre growth for some time to come as she announced that her Washington-based organisation would next week trim its forecasts for activity.
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Ahead of the Fund’s annual meeting, Lagarde urged action – including an easing of austerity, job creation programmes and higher spending on infrastructure – to boost growth.
“Our main job now is to help the global economy shift gears and overcome what has been so far a disappointing recovery: one that is brittle, uneven, and beset by risks”, Lagarde said in a speech.
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The Fund’s half-yearly world economic outlook in April predicted growth of 3.6% in 2014, rising to 3.9% in 2015, but Lagarde said: “Overall, the global economy is weaker than we had envisaged even six months ago. Only a modest pickup is foreseen for 2015, as the outlook for potential growth has been pared down.
“Yes, there is a recovery but as we all know – and can all feel it – the level of growth and jobs is simply not good enough.”
The IMF’s managing director said that six years after the start of the financial crisis there was still continued weakness in the global economy.
“Countries are still dealing with the legacies of the crisis, including high debt burdens and unemployment.”
She added that there were “serious clouds” on the horizon including the risk that a prolonged period of low growth would discourage consumer spending and investment. The Fund is also braced for turbulence in financial markets when the Federal Reserve, America’s central bank, starts to raise interest rates.
Lagarde identified a number of geo-political risks, including an escalation of the crisis in Ukraine, political developments in the Middle East and an expansion of the Ebola outbreak.
“The global economy is at an inflection point”, Lagarde said. “It can muddle along with sub-par growth – a ‘new mediocre”’ or it can aim for a better path where bold policies would accelerate growth, increase employment, and achieve a ‘new momentum’.
Monetary policy - interest rates and money creation through quantitative easing programmes - would not be enough on its own, Lagarde, She urged that the pace of consolidation and composition of fiscal measures – tax and public spending should support economic activity to the extent possible, lower payroll taxes to encourage firms to hire and higher public investment.
