New IMF managing director Kristalina Georgieva on Thursday said that a trade truce between the US and China could trim expected losses to the world economy, but would not be enough to produce strong global growth.
Before last week’s tentative trade agreement, the IMF had estimated that higher trade tariffs would mean a 0.8 percent drop in economic input by the end of next year.
Georgieva said that a new estimate factoring in a US-China deal slightly reduces that lost input, to a still-significant 0.6 percent.
Photo: AFP
She said more must be done by the world’s two biggest economies to resolve their disputes and that all nations must try to overhaul their trade rules.
“Our hope is to move from a trade truce to a trade peace,” she told reporters.
The IMF has estimated that the punitive tariffs imposed in disputes, including the US-China spat, could cost the global economy as much as US$700 billion in lost output by the end of next year, an amount equivalent to the annual output of Switzerland.
Georgieva, a Bulgarian economist who was formerly chief executive of the World Bank, was tapped last month to take over at the IMF, succeeding Christine Lagarde.
Georgieva spoke to reporters before three days of discussions among finance officials as part of the fall meetings of the 189-nation IMF and the World Bank.
Georgieva said that she hoped the discussions would focus on ways to ease trade tensions and begin the groundwork to update the rules of world trade.
The administration of US President Donald Trump has repeatedly attacked the Geneva-based WTO, saying that it is biased against the US.
“We have been reaching agreements on trade based primarily on the past,” she said.
Georgieva said that commerce has been transformed by advances in technology and they need to be acknowledged in new trade rules.
World Bank president David Malpass said that his focus for the meetings would be efforts to ensure that everything possible is done to restart global growth, given that the 700 million people living in extreme poverty — one in 12 people on the planet — would be the most harmed by a prolonged slowdown.
“There is an urgency to what we’re doing because of the challenges facing development,” Malpass said.
“Global growth is slowing, investment is sluggish, manufacturing activity is soft and trade is weakening,” he said.
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