Lagarde made the comment ahead of the two-day G20 Summit to be held in Hangzhou, Zhejiang province, from Sunday to Monday, during which global powers would discuss issues including low growth, high inequality, and slow progress on structural reforms.
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“However, when you look deep down at the economic growth prospects, at the growth potential, at the productivity, we are not getting very good signals, and we will probably be revising down our forecast for growth in 2016”.
The report’s chief author, International Monetary Fund economist Helge Berger, told reporters in Washington the organization expected in October to downgrade its United States growth forecast in light of the poor performance seen in the first half of this year. If another decline is forecast, it would mark the sixth straight decline in the last 18 months.
Lagarde also noted that as of 2016, global economic growth had stagnated for five years below the 3.7 percent average that prevailed between 1990 and 2007.
But the more interesting element of the International Monetary Fund analyses is that it now fears the emergence of a catch 22 situation in the sense that slow growth which reduce growth of incomes across nations, and especially of the more vulnerable low income earners, will feed negative sentiments against globalisation in a large segment of the population and not only force political groups to go slow on structural reforms but also encourage them to restrict free trade.
She also notes that if we want to make trade work for all parties, those who make the policies should improve efforts to retrain, build skills and assist in occupational and geographic mobility among those most affected.
The IMF said that from their own research they were able to determine that goods and services trade volume growth is at an elevated risk of stalling if there is no intervention to prevent it. The funds are needed to allow a $12 billion IMF loan program to be approved by the Fund’s board.
Lagarde also said she was encouraged by Greece’s recent privatization efforts and was hopeful that reform legislation would soon be passed and implemented.
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Christine Lagarde, the IMF’s managing director, used a blog to call on the G20 to adopt a four-pronged approach that would result in more economic stimulus, structural reform, a renewed commitment to free trade and a more equitable division of the proceeds of growth. However, US Treasury Secretary Jacob Lew said: “We certainly are not seeing a global recession like we did in 2008, but I think that the macroeconomic policies have failed to take advantage of the opportunity to have a more robust period of growth”.
