WASHINGTON D.C.: Stagnation in the eurozone, geopolitical crises, and a menacing health disaster in West Africa confront the world’s leading finance officials as they meet in Washington beginning on Thursday (Friday in Manila).
Six years after the financial crisis, the world economy is growing, at a modest 3.3 percent annual pace, and could pick up next year, according to the International Monetary Fund (IMF).
But the benefits of that are fragmented, and many pitfalls confront the world’s central bankers and finance ministers as they gather at the annual IMF-World Bank meetings.
“The global economy faces the prospect of prolonged subpar growth, accompanied by high unemployment and rising inequality,” warned IMF Managing Director Christine Lagarde on Wednesday (Thursday in Manila).
“There is a very real risk that the world could get stuck for some time with a new ‘mediocre’ level of growth,” she added.
While “mediocre” is much better than the performance of the economy just a few years ago, what it means for people in many countries could be flat incomes and not enough job generation to lower high rates of unemployment.
The IMF and World Bank are pressing governments to push reforms that will boost growth, to target spending on job-creating activities like infrastructure development, and to strengthen their finances to be able to handle potentially rough seas ahead.
“The challenge for both advanced and emerging market economies is to go beyond the general mantra of ‘structural reforms,’ to identify which reforms are most needed, which reforms are politically feasible,” said IMF chief economist Olivier Blanchard.
On Thursday, the World Bank will officially launch a new fund for supporting infrastructure development.
The IMF, which has pressed governments to rein in spending and cut their debts, has now turned around: it says they can borrow more to build and rehabilitate roads, power facilities, and other public infrastructure to add value to their economies.
But both are particularly worried about stagnation in the huge eurozone economy. In its newest outlook on the global economy this week, the IMF said there is a 40 percent chance the region could slide into a third recession since the financial crisis erupted.
Ebola threatens world economy
Also on the list of imminent threats to the IMF’s forecast of 3.8 percent global growth next year are the tensions in the Middle East and Ukraine, and the still-uncontrolled Ebola outbreak in three countries in West Africa.
The World Bank warned this week that if the epidemic, which has killed nearly 3,900 people, is not under control by the end of the year it could spread throughout West Africa to an economic cost of nearly $33 billion dollars next year.
On Thursday morning, the leaders of the three affected countries, Guinea, Sierra Leone and Liberia, will discuss the outbreak in person and via video conference with top development officials at the IMF-World Bank meetings.