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IMF Managing Director Christine Lagarde speaks during a press conference during the World Bank Group / International Monetary Fund Annual Meetings at IMF Headquarters in Washington, DC, October 12.
IMF Managing Director Christine Lagarde speaks during a press conference during the World Bank Group / International Monetary Fund Annual Meetings at IMF Headquarters in Washington, DC, October 12.

World Leaders Urged to Help Those Left Behind

Policymakers should benefit from the global broad-based economic recovery—the best in a decade—and take decisions with an aim to make the recovery sustainable

World Leaders Urged to Help Those Left Behind

World leaders should take advantage of the healthiest global growth in years to pursue policies that will spread prosperity to those being left behind, the head of the International Monetary Fund is arguing.
"It is not time to be complacent," IMF Managing Director Christine Lagarde said Thursday. "Policymakers can use this moment to provide more certainty and provide for the future risks", AP reported.
Lagarde's warning came as global financial leaders gathered in Washington for the annual meetings of the 189-member IMF and its sister lending organization, the World Bank. In addition, a meeting of finance officials from the world's 20 biggest economies, the Group of 20, is wrapping up Friday.
IMF forecasters expect the global economy to expand 3.6% this year, the fastest pace since 2010. And Lagarde says three-fourths of the world economy is participating in the uptick, creating the broadest recovery in a decade.
But many workers have seen their wages stagnate and their jobs replaced or threatened by technology. And many countries are seeing a widening income gap between rich and poor. "The result is growing political tensions in many places and increased skepticism about the benefits of globalization," Lagarde said.
She called on the policymakers to take benefit of the global broad-based economic recovery—the best in a decade—and take decisions with an aim to make the recovery "sustainable".


Reducing the Gap
Discontent with globalization and inequality is stoking the populist politics that took Donald Trump to the White House and prompted British voters to opt out of the European Union. "We have to reduce the gap between those who have everything and those who have nothing," French Finance Minister Bruno Le Maire echoed.
While the IMF boosted its outlook for the 19-country eurozone, Japan and China, it trimmed its estimates slightly for the United States compared with the projections it had made in April. It now sees US growth at 2.2% this year and 2.3% next year, still up from the lackluster 1.5% pace of last year.
IMF economists said the reduction of 0.1 percentage point for 2017 and 0.2 percentage point for 2018 reflected less certainty over when the Trump administration will be able to get its tax cut plan through Congress. Even before the reductions, the IMF's forecast was well below the 3% growth rates the administration says will be achieved with its policy changes to taxes and regulation and tougher trade enforcement.
An IMF report out Wednesday concluded that many countries could raise taxes on the wealthiest without sacrificing economic growth. But Lagarde suggested another way to cut income inequality: putting more women to work, improving their access to credit and narrowing their pay gap with men. "A no-brainer," she said.
Lagarde said one thing the major economies will need to handle carefully is the movement away from massive economic support from their central banks. Such a move, if not well-telegraphed in advance, could disrupt global financial markets and reduce needed capital to developing countries.

Warning of Rising Risks
Lagarde said that a number of threats could derail the global economic recovery, despite signs that 2017 will be the best year for global growth since 2010.
She warned that global financial leaders need to beware of a number of threats from growing political tensions to increased skepticism about the benefits of globalization and rising levels of income inequality.
Lagarde said it will be important for finance ministers from the IMF's 189-member countries to focus on addressing these threats at a time when the global economy appears to finally be in a sustained recovery following the deep recession caused by the 2008 financial crisis.
Lagarde said that one thing the major economies will need to handle carefully is the movement away from massive economic support from their central banks. Such a move if not well-telegraphed in advance could disrupt global financial markets and reduce needed capital to developing countries.
Prior to Lagarde's warning, foreign finance leaders already had raised questions about how the Trump administration would pursue its "America First" policies and whether they would harm the global economy with rising protectionist trade pressures or market disruptions from increased tensions with North Korea and other nations.

 

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