IMF chief optimistic on global growth, but warns of slowdown

Also warns against trade protectionism that limits consumer choice.

The International Monetary Fund (IMF) is optimistic on the outlook for global growth but has sounded a warning about a possible setback due to fading fiscal stimulus and rising interest rates.
 
According to media reports, IMF Managing Director Christine Lagarde, in a speech in Hong Kong recently, was optimistic on the outlook for global growth but warned darker clouds are looming due to fading fiscal stimulus and rising interest rates. Lagarde was speaking after attending the Boao Forum in China. 
 
Outlining the top priorities for the global economy, Lagarde said, it must stay away from protectionism, guard against financial risk and foster long-term growth. 
 
Notably, currently, the United States and China are engaged in a trade conflict that has businesses worried and has disrupted global supply chains.
 
“History shows that import restrictions hurt everyone, especially poorer consumers,” Lagarde was reported as said. 
 
She added that trade conflicts lead to more expensive products and limit the choices of consumers. Further, trade wars prevent trade from playing its essential role in boosting productivity and spreading new technologies. 
 
IMF chief said the best way to tackle global imbalances is to use fiscal tools or structural reforms. She cautioned that World Trade Organization’s rules were in danger of being destroyed and added that it would  be “an inexcusable, collective policy failure.”
 
Lagarde said there was a need for policymakers to commit to a level playing field and resolve disputes without using extreme measures. 
 
In 2018 and 2019, global growth momentum would eventually slow due to fading fiscal stimulus, rising interest rates and tighter financial conditions, the IMF chief said. According to a new analysis by the IMF, global debt had reached an all-time high of $164 trillion, which is 40 per cent higher than in 2007, and China accounts for just over half of that increase.
 
Economies must reduce government deficits, strengthen fiscal frameworks and place public debt on a gradual downward path, Lagarde said “Strengthening financial stability by increasing buffers in corporate and banking sectors is key, especially in large emerging markets such as China and India,” she added.
 
With housing markets in major cities worldwide increasingly moving in tandem, Lagarde warned it could amplify any financial and macroeconomic shocks coming from any one country. 
 
S​ource: Media reports​

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