World must ‘seize the opportunity’ of global recovery- IMF’s Lagarde

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WASHINGTON: International Monetary Fund chief Christine Lagarde said Thursday a worldwide economic recovery is taking hold, opening a window for countries to enact reforms aimed at attaining broader, lasting prosperity.

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“The long-awaited global recovery is taking root,” she said in an address Thursday evening at Harvard’s Kennedy School of Government.

Countries around the globe are seeing renewed or sustained economic expansion, coinciding with greater stability in banks and market confidence, she said, according to prepared remarks.

“Can the world seize the opportunity of the upswing to secure the recovery and create a more inclusive economy that works for all?” she asked.

Her remarks come the week before the IMF and World Bank are due to begin annual meetings with 189 member nations at which the Fund will unveil updated forecasts for global growth.

The IMF since last year has confronted a tide of populism in the developed world, with forces hostile to trade liberalization on the rise in the United States and Europe.

But Lagarde spotlighted what she said were dangers on the horizon, including slow growth, mounting inequality in advanced economies and failures in adapting to technological change.

“As a result, our social fabric is fraying and many countries are experiencing increased political polarization.”
Lagarde said inaction would “let a good recovery go to waste,” leading to weak growth, sluggish job creation, fraying social safety nets and leaving financial systems exposed to future crises.

In addition to calling for monetary and fiscal policies that support growth, Lagarde also said countries should invest in infrastructure, research and development to boost productivity and demand, which could reduce unemployment and under-employment.

Expanding access to health care and education as well as adopting progressive taxation could help reduce inequality, she added.

“IMF research has shown that excessive inequality hinders growth and hollows out a country’s economic foundation,” she said. “It erodes trust within society and fuels political tensions.”

Lagarde also called climate change “a threat to every economy and every citizen,” saying that a one-degree increase in average annual temperature in country like Bangladesh would cut per capita GDP by almost 1.5 percent.

“Policymakers should use all tools at their disposal to act now,” she said.

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