“In my meetings with G-20 Leaders over the past two days, I emphasized that global growth remains strong, but that it is moderating and becoming more uneven. Pressures on emerging markets have been rising and trade tensions have begun to have a negative impact, increasing downside risks. Choosing the right policy is therefore critical for individual economies, the global economy, and for people everywhere,” Christine Lagarde (Managing Director of the IMF) said today at the end of of the Group of 20 (G-20) Summit, that has been held in Buenos Aires from 29th November to 1st December 2018.
Regarding the trade war started off by the President of the United States, Donald Trump, Lagagarde stated: “The choice is especially stark regarding trade. We estimate that, if recently raised and threatened tariffs were to remain in place and announced tariffs were implemented, about three-quarters of a percent of global GDP could be lost by 2020. If, instead, trade restrictions in services were reduced by 15 percent, global GDP could be higher by one-half of a percent. The choice is clear: there is an urgent need to de-escalate trade tensions, reverse recent tariff increases, and modernize the rules-based multilateral trade system.
IMF Managing Director called for a decisive and collaborative action by G-20 leaders as global growth moderates and risks Increase.
Actions to reduce global debt, also needed
Lagarde continued: “Another urgent issue is the excessive level of global debt, about $182 trillion by the IMF’s estimate. It is important, particularly for highly indebted emerging-market and low-income countries, to rebuild buffers and reverse procyclical fiscal policies. Increasing debt transparency, such as on the volumes and terms of loans, by borrowers as well as lenders,is as important as supporting debt sustainability.”
Five policy recommendations
“To meet the challenges facing the global economy, I made the following policy recommendations to the G-20,” Christine Lagarde said and then listed the five:
“First, fix trade—this is priority No. 1 to boost growth and jobs.
“Second, continue to normalize monetary policy in a well-communicated, gradual, data-driven manner—and with due regard to potential spillover effects.
“Third, address financial risks, using micro- and macro-prudential tools to tackle problems related to leveraged lending, deteriorating credit quality, and high exposure to foreign currency or foreign-owned debt.
“Fourth, use exchange rate flexibility to mitigate external pressures, avoiding tariffs and other policies that could weaken market confidence.
“Finally, eliminate legal obstacles to the participation of women in the economy. This is key to tackling high and persistent inequality, and would add to the growth potential of all G-20 countries.
Image over the headline.- Official welcome at the G20 summit being held in Buenos Aires (Argentina) from Mauricio Macri to the Managing Director of the International Monetary Fund, Christine Lagarde. © G20 Summit.
