By Rose Welimo
The International Monetary Fund reports the global economy is expanding moderately but the outlook has weakened further since October, and risks have increased.
At a news conference to open the IMF-World Bank Spring Meetings, IMF chief Christine Lagarde presented the Global Policy Agenda, which calls for a more potent policy mix of structural, fiscal and monetary actions to lift growth.
She said the global economy had been impaired from growth for too long, adding that a sustained recovery may not be delivered due to the expected higher living standards, lower unemployment and declining debt levels.
“We believe that cooperation should be stronger. First example, the action to help refugees. Every second, nearly 30 people are displaced somewhere in the world. Now, that requires bigger, broader and bolder approach, and one that is certainly based on cooperation amongst the nations. It cannot be the affair of one country,” said Lagarde.
However, some recent improvement in economic indicators, somewhat firmer oil prices, and actions by major central banks have all contributed to improving sentiment.
Building on these recent positive developments, the global economy can get back on a stronger and safer track, but the current policy response will need to go further.
Lagarde also spoke on the need for more international cooperation on taxes.
“We need much stronger international tax cooperation. A lot of things have gone global and it’s unlikely to recede. But, there’s one thing, which has not gone very global, and that is taxation, which is still very much a local affair associated with national sovereignty. Well, we contend that there has to be a lot more work and a lot more cooperation on a much broader basis in international taxation,” she said.
Lagarde was asked about the likely impact of Britain’s potential exit from the European Union.
“It’s been a long marriage between members of the European Union. And, it’s really my personal hope that it doesn’t break. And, like all marriages, good talks can actually help.”
She also discussed the need for prompt action for Greece.
“There is one point on which I completely agree with the Greek authorities, which is that we need and they need to move fast. Equally, I think we’ve always been very consistent in saying that the objective is stability, sustainability, sovereignty of Greece, ultimately,” she said.
She explained countries must reinforce their commitment to durable global growth and employ a more potent policy mix.
A three-pronged approach with monetary, fiscal, and structural actions can work as a virtuous trinity, lifting actual and potential growth, averting recession risks, and enhancing financial stability.
The IMF will support this commitment by helping countries identify space, craft appropriate policies, and build capacity to deliver on these policies; providing a strong financial backstop for policy implementation; and assisting members with new challenges.
Lagarde also spoke about monetary intervention in Japan.
“We have fairly robust criteria under which intervention is legitimate. And, that clearly can happen in the case, and only in the case, where very disruptive volatility must be avoided. So, we are watching very carefully what’s happening on the Japanese markets. But, that’s the instance where intervention is, in our view, legitimate.”