Lagarde urges leaders to ‘seize opportunity’

MIND THE GAP::Slow growth, inequality and failure to adapt to technological change is contributing to political polarization, the IMF managing director said


Sat, Oct 07, 2017 - Page 10

IMF managing director Christine Lagarde on Thursday said a worldwide economic recovery is taking hold, opening a window for countries to enact reforms aimed at attaining broader, lasting prosperity.

“The long-awaited global recovery is taking root,” she said in an address at the John F. Kennedy School of Government at Harvard University in Massachusetts.

Countries around the globe are seeing renewed or sustained economic expansion, coinciding with greater stability in banks and market confidence, she said.

“Can the world seize the opportunity of the upswing to secure the recovery and create a more inclusive economy that works for all?” she asked.

Her remarks come the week before the IMF and World Bank are due to begin annual meetings with 189 member nations at which the IMF will unveil updated forecasts for global growth.

In July, the IMF predicted that global growth would hit 3.6 percent next year — the fastest since 2011 and a welcome sign the world economy had broken out of a period of stagnation following the 2007 to 2009 financial crisis.

The IMF since last year has confronted a tide of populism in the developed world, with forces hostile to trade liberalization on the rise in the US and Europe.

However, Lagarde called attention to what she said were dangers on the horizon, including slow growth, mounting inequality in advanced economies and failures in adapting to technological change.

“As a result, our social fabric is fraying and many countries are experiencing increased political polarization,” she said.

Lagarde said inaction would “let a good recovery go to waste,” leading to weak growth, sluggish job creation, fraying social safety nets and leaving financial systems exposed to future crises.

In addition to calling for monetary and fiscal policies that support growth, Lagarde also said countries should invest in infrastructure, research and development to boost productivity and demand, which could reduce unemployment and under-employment.

Expanding access to healthcare and education as well as adopting progressive taxation could help reduce inequality, she added.

“IMF research has shown that excessive inequality hinders growth and hollows out a country’s economic foundation,” she said. “It erodes trust within society and fuels political tensions.”

Lagarde also called climate change “a threat to every economy and every citizen,” saying that a 1?C increase in average annual temperature in country like Bangladesh would cut per capita GDP by almost 1.5 percent.

“Policymakers should use all tools at their disposal to act now,” she said.