Lagarde urges cross-country co-operation for global growth boost

10 Jun 14
Greater co-operation between national economies could increase global output by 2% over the next five years, the International Monetary Fund managing director has said.

By Judith Ugwumadu | 10 June 2014

Greater co-operation between national economies could increase global output by 2% over the next five years, the International Monetary Fund managing director has said.

Speaking at the International Economic Forum of the Americas in Canada yesterday, Christine Lagarde said global economic and financial cooperation was important.

‘If countries implement the right set of policies for their domestic welfare, the whole world will get to benefit,’ she told the forum.

‘Indeed, in the context of the G20 meeting in Sydney, our estimates suggest that co-operative action can increase global output by 2% over the next five years. Reaping these benefits lies in working together in laying the foundations for the next era of growth.’

Across the world, many countries are trying to rebalance their economies toward more stable sources of growth, Lagarde reflected.

‘Be it China, trying to rebalance away from investment toward consumption, or Germany trying to boost domestic sources of demand,’ she said.

‘The global economy is turning the corner on the Great Recession, and overall prospects are improving.

‘Economic activity is gaining momentum, and despite a bumpy start earlier in the year, we expect an expansion of 3.6% in 2014 and 3.9% in 2015.’

But the IMF chief warned of ongoing risks to financial stability, adding that the recovery remained ‘fragile and uneven’.

She spoke of the emerging risk of low inflation in the advanced economies, particularly in the eurozone, which threatened derail the incipient recovery and suppress growth and jobs. The European Central Bank decision, last week, to head off the risk of deflation and introduce its first-ever negative interest rate was hailed by Lagarde.

‘The recent proactive stance by the ECB is very welcome, and we are encouraged that it is willing to do more if necessary,’ she said.

In the emerging economies, there was a risk of renewed market volatility and rising financial instability associated with the winding down of the asset purchase programme in the US.

In addition, she said that geopolitical tensions, in Ukraine for example, were rising and if not managed well, could have broader implications. 

 

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