Speaking ahead of next week’s IMF-World Bank annual meeting in Lima, Peru, where the IMF’s next World Economic Outlook will be published, Lagarde also said there would only be “modest acceleration” in the global economy next year.
Speaking at a Council of the Americas event in Washington yesterday, the IMF chief said she was “concerned about the state of global affairs”.
Particular concerns were the refugee influx into Europe, which had brought attention to the sharp political and economic tensions in North American and the Middle East, the prospect of 2015 being the hottest year on record and the state of the global economy.
“The prospect of rising interest rates in the United Sates and China’s slowdown are contributing to uncertainty and higher market volatility,” she told delegates.
“There has been sharp deceleration in the growth of global trade. And the rapid drop in commodity prices is posing problems for resource-based economies.”
There was some good news with a modest pickup in advanced economies, especially in the eurozone, Japan, the UK and the US, but this was offset by declining growth in emerging economies.
“India remains a bright spot. China is slowing down as it rebalances away from export-led growth. Countries such as Russia and Brazil are facing serious economic difficulties,” she continued.
“Growth in Latin American countries, in general, continues to slow sharply. We are also seeing weaker activity in low-income countries – which will be increasingly affected by the worsening external environment.”
But at a global level, there was still a drag on the economy because “financial stability is not yet assured”, Lagarde said.
“We see global growth that is disappointing and uneven. In addition medium-term growth prospects have become weaker. The “new mediocre” of which I warned exactly a year ago – the risk of low growth for a long time – looms closer.”
Lagarde called on policymakers worldwide to make a “policy upgrade to address the current challenges”. She said the most advanced economies, except the US and possibly the UK, would need to provide some kind of economic stimulus.
