IMF to cut forecast for world economy
Print Edition
THE global economy’s already modest prospects will decline further unless authorities take stronger action to boost growth, the head of the IMF warned yesterday, saying the institution would cut its headline forecasts next week.
Christine Lagarde said China’s shift to an economic model based more on domestic demand, stubbornly low commodity prices and tighter funding conditions in some countries had all clouded the outlook.
“Let me be clear: we are on alert, not alarm. There has been a loss of growth momentum,” the International Monetary Fund’s managing director said in a speech at Frankfurt’s Goethe University.
The recovery from the 2007-2009 global financial crisis “remains too slow, too fragile, and risks to its durability are increasing.”
But if policy-makers confronted the challenges and acted together, “the positive effects on global confidence — and the global economy — will be substantial.”
Lagarde advised the United States to raise its minimum wage, Europe to improve job training and emerging economies to cut fuel subsidies and boost social spending.
She gave her strongest hint yet that the IMF will cut its global economic forecasts next week.
“The global outlook has weakened further over the last six months so you can (deduce) from that there will be a slight revision (in the IMF estimates),” Lagarde said.
Her remarks come less than two weeks before ministers, central bankers and other policy-makers from the IMF’s 188 member countries gather in Washington to assess the health of the world economy at the IMF and World Bank Spring Meetings.
While the US recovery has been gaining momentum and some emerging markets including Mexico have performed well, the IMF views Europe and Japan as major disappointments.
To counteract the headwinds, Lagarde called for accelerated structural reforms, increased fiscal support and continued accommodative monetary policy.
Lagarde called for improved tax incentives for research and development investments.
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