IMF managing director Christine Lagarde on Friday urged the G20 major economies to fulfill their pledges to revive the faltering global economy.
Ahead of this week’s meeting of G20 finance ministers and central bankers in Istanbul, Turkey, Lagarde said they needed to implement the G20 leaders’ commitments made in November last year at a summit in Brisbane, Australia, to boost growth, adding more than US$2 trillion to the global economy and millions of jobs over the next four years.
“Without action, we could see the global economic supertanker continuing to be stuck in the shallow waters of subpar growth and meager job creation,” Lagarde said in a blog on the IMF Web site.
The G20 industrialized nations, which account for more than 80 percent of the global economy, tasked the IMF to monitor the implementation of its growth strategy. Turkey took over the G20 presidency in December last year.
Lagarde said the G20 finance ministers meeting tomorrow and on Tuesday should work urgently on structural reforms amid global risks ranging from divergent central bank policies, with the US Federal Reserve on a tightening path, while others are increasing stimulus; a stronger US dollar, and weak growth and inflation in the eurozone and Japan.
“We need a decisive push for structural reforms in areas such as trade, education, health, social safety nets and labor and product markets, as well as efficient infrastructure,” she said.
Though the global economy might get a further lift from falling oil prices and relatively stronger US growth, Lagarde said, the Fed’s ongoing exit of exceptional support for the US recovery — even if well-managed — could result in what she termed “excessive volatility” in financial markets.
Lagarde said that the strengthening dollar poses a special risk for emerging-market economies, where banks and companies have increased their borrowing in the US currency over the past five years.
A further risk to the global economy is the possibility that the eurozone and Japan “could remain trapped in a twilight zone of low growth and low inflation for a prolonged period,” Lagarde said.
“These ‘low-low conditions’ would raise the risk of recession and deflation, because they would make it even harder for many countries to reduce high unemployment and high debt,” Lagarde said.
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