Forceful economic reforms are needed in the face of global economic weakness and calls for isolationism, IMF Managing Director Lagarde said on Thursday, in a challenge to Group of 20 leaders as they prepare to gather in China this weekend.
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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.
In a surveillance note released ahead of the G20 summit in Hangzhou, China on Sunday and Monday, the International Monetary Fund said that more forceful action was needed to boost sustainable and more inclusive growth, despite the challenging policy environment created by low growth and rising inequality.
“Weak global growth that interacts with rising inequality is feeding a political climate in which reforms stall and countries resort to inward-looking policies”, she said.
“India has recently taken important steps toward a national goods and services tax which, when fully implemented, promises to boost tax buoyancy and growth, including by enhancing the efficiency of the internal goods and services market”, the note said. These include a recession sparked by Britain’s vote to leave the European Union or slowing growth in China.
“At the moment there’s simply not a lot of common overlapping interests between the major economies”, Christopher Balding, professor of economics at Peking University HSBC Business School, told the news agency.
The IMF is due to revise its World Economic Outlook forecasts in early October ahead of its annual meetings with the World Bank.
The IMF sees the world economy expanding 3.1% in real terms this year.
“It’s clear for the United States given the developments in the first two quarters this year that we’re in for a downgrade of that outlook”, said Berger.
Under the 36-month 370 million euro loan deal signed in February 2014, the fund has already extended 298.3 million euro to Albania, the IMF said in a statement late on Wednesday.
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If unaddressed, prolonged low inflation could reduce investment and drag growth further downward. During the last 30 years, the income going to top earners has been increasing in a number of advanced economies, while it has been stagnant for those at the bottom, it added. They also said that those countries which have the fiscal space should more forthright pursue necessary public investments in infrastructure as well as support more growth through the avoidance of direct tax increases increases on consumers overall.
