Global policymakers will have to overcome a trio of hurdles if the world economy is to successfully generate more rapid and sustainable growth, IMF Managing Director Christine Lagarde said.
She told a media briefing at the start of the IMF-World Bank Spring Meetings in Washington D.C. that the overriding topic at the Meetings will be growth—“the quest for higher growth, better quality growth, more inclusive growth, and sustainable growth.”
In practice, Lagarde stated, this would mean overcoming a trio of hurdles.
• First, an extended period of low inflation in the advanced economies—especially in the euro area—would hurt both growth and jobs. In this context it was encouraging, Lagarde noted, that the European Central Bank had reiterated its commitment to use unconventional measures as needed.
• Second, low growth right now—this requires policy action across the board.
In the advanced economies—to get the pace of fiscal adjustment and monetary normalization right—timing, execution, and communication.
In the emerging market economies—to strengthen macro and prudential policies to safeguard against market volatility.
In the low-income countries—where growth continues to be strong, but where rapid debt build-up needs to be watched.
• Third, potentially low growth into the future—ambitious and coherent policies are required to avoid years of subpar growth and to secure global financial stability.
Step up reforms
“This means that all countries need to step up structural reforms—in labor markets as well as product and services markets—and well-targeted investment,” Lagarde declared.
It also means renewing the momentum on global financial reform and containing financial vulnerabilities emerging in certain “hotspots,” for instance in the non-bank sector in the United States and in China, and high corporate debt in emerging markets, she added. She noted that these initiatives would take place against the background of rising geopolitical risks.
Achieving faster and better growth would require the right policies by countries and the right cooperation across them, Lagarde said, adding that the IMF is the ideal forum for global cooperation through its advice, lending, and capacity building.
Lagarde noted that the bold actions needed to generate more rapid and sustainable growth are outlined in the IMF’s Global Policy Agenda (see box) which will be discussed during the Spring Meetings by the IMF’s policy-setting panel, the International Monetary and Financial Committee.
IMF quota, governance reforms
Lagarde reiterated that she hoped the IMF’s quota and governance reforms would be implemented soon, with the support of the IMF’s entire membership. Lagarde added she hoped that pressure from IMF member countries on members that had not yet ratified the IMF quota and governance reforms would bear fruit “in the not-too-distant future.”
Responding to questions, Lagarde said she took Greece’s successful return to international capital markets as a sign that Greece is heading in the right direction. “There is still a lot to be done, and the program is not over, but this is a clear indication that a return to markets, which is clearly the objective of any IMF program, is on the horizon.”
Lagarde told reporters she expected to discuss the status of Japan’s economic reforms with the national authorities during the Spring Meetings. “I will particularly focus on the reform of the labor market to facilitate access to the job market for Japanese women.”