Christine Lagarde, Head of the International Monetary Fund, has warned that governments must urgently pursue more accommodative economic policies to support a weakening and unstable global economy.
Lagarde warned that persistent low growth could become self-reinforcing if policymakers kept delaying action.
“This has consequences for the social and political fabric in many countries, even in Germany, where the economy has been strong.
“To some, the answer is to look inward, to somehow unwind these linkages, to close borders and retreat into protectionism. As history has told us — time and again — this would be a tragic course,” said Lagarde.
“The answer to the reality of our interconnected world is not fragmentation. It is co-operation” (1).
“The good news is that the recovery continues. We have growth. We are not in a crisis. The not-so-good news is that the recovery remains too slow, too fragile, and risks to its durability are increasing,” Lagarde continued (2).
The global economic outlook has weakened over the past six months, due to weakness from China, commodity price weakness and the prospect of global financial policy tightening, led by the US.
Lagarde’s call to action comes ahead of what is forecast to be the lowering of the IMF’s growth forecasts for the global economy next week. The IMF’s latest forecast for global growth, released in January, was 3.4% for 2016. Economists at the fund have been lowering their growth estimates for emerging economies (3).
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