Global economy ‘delicate’, says IMF chief

4 Apr 19

The global economy is at a “delicate moment” due to trade tensions and financial tightening, IMF chief Christine Lagarde has warned.

Lagarde said global growth later this year will be “precarious” due to country-related uncertainties such as Brexit and trade barriers, in a speech on Tuesday to the US Chamber of Commerce in Washington DC.

“The reality is that many economies are not resilient enough. High public debt and low interest rates have left limited room to act when the next downturn comes, which inevitably it will,” she said.

She highlighted three areas of action to ease pressure on the global economy including improving domestic policies, cross-border policies and coordinated efforts to tackle global challenges such as corruption.

Improving domestic policy will require “continual hard work of upgrading tax systems, mobilising domestic revenue, prioritising growth-friendly expenditure and reducing public debt where needed,” she said.

Domestic policies should also look to address inequality in relation to education, healthcare and infrastructure for young people and women.

Lagarde criticised increasing global trade tensions like those between the US and China.

“Nobody wins a trade war. That is why we need to work together to reduce trade barriers and modernise the global trade system – so that we all win,” she said.

Her speech comes ahead of the IMF and Word Bank’s spring meetings next week for finance ministers and central bank governors.

Lagarde took aim at current approaches to international corporate taxation, which she described as “fundamentally flawed” and suggested reform was necessary but more difficult for developing countries.

“Developing economies rely especially on corporate tax revenues to fund essential investment in people and infrastructure,” she said.

“Our analysis shows that non-OECD countries lose about $200bn a year because companies are able to shift profits to low-tax locations.”

Lagarde ended her speech by calling for a global effort on “issues that no country can solve alone” such as climate change, cyber-risks and corruption.

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