Chicago, United States | AFP |
The head of the IMF on Wednesday renewed warnings against protectionism and trade restrictions, saying that the global economy risked prolonged low growth and that advanced economies faced painful inequality.
Christine Lagarde, the International Monetary Fund’s managing director, said the current global recovery was still fragile following the Great Recession of 2008-2009 and that populist political currents rising in the developed world threatened to undo the progress made.
“For the past several years, the global recovery has been weak and fragile and this continues to be the case today,” Lagarde said in prepared remarks delivered at Northwestern University, near Chicago.
“Especially for advanced economies –- while there are some good signs –- the overall growth outlook remains subdued.”
“We continue to face the problem of global growth being too low for too long, benefiting too few,” she said.
Lagarde spoke ahead of next week’s annual meetings of the IMF and World Bank, at which development bankers gather to discuss global efforts at poverty reduction. The topics she raised were likely to be front and center at the conclave.
Her words also echoed the IMF’s message in recent weeks. Ahead of the Group of 20 summit in China earlier this month, Lagarde warned that high debt, weak demand, eroding work forces and labor skills were weakening incentives for investment and slowing productivity, threatening to create what she called a “low growth trap.”
Lagarde cited some reasons for optimism, such as strengthening labor markets and falling poverty in the United States, efforts by China and India to achieve more sustainable growth, as well as signs of improvement in Brazil and Russia.
But she said that falling commodity prices had hit the Middle East and poor countries in Sub-Saharan Africa particularly hard.
The IMF has also signaled it expects to downgrade its forecasts for US growth due to sub-par performance in the first half 2016.
Citing an increase in protectionist measures around the globe since 2012, Lagarde refered to raised trade barriers as being among the “failed recipes of the past.”
Both US presidential nominees have said they oppose the US government’s Pacific Rim trade pact, the Trans-Pacific Partnership, and voters in Britain this year chose to secede from the European Union, creating new barriers to trade between the two sides.
“If we turn our backs on trade now, we would be choking off a key driver of growth at a point when the global economy is still in need of every bit of good news it can get,” Lagarde said.
“Restricting trade is a clear case of economic malpractice.”
Lagarde also called on governments to fight economic inequality, by investing in the education of girls — “a proven, high-return investment” — as well as offering vocational training to workers displaced by off-shoring, outsourcing and new technologies.