Global economy going through period of change: IMF

Oct 12, 2015 (LBO) – The global economy is going through a period of change, the International Monetary Fund’s Managing Director Christine Lagarde said during Annual Meetings of the World Bank and the IMF in Peru over the weekend.

“Uncertainty over the global economy is on the minds of policymakers in all countries, including here in Peru,” she said.

“We are no longer in an economic crisis, but this is a time of change. Old paradigms no longer hold, new economic relationships emerge. This means it is also a time of opportunity and action,” she added.

The IMF sees global growth weaker this year at 3.1 percent, compared with 3.4 percent last year, and only a modest acceleration to 3.6 percent in 2016.

This is a period of transition, Lagarde said due to China’s shift to a new growth model, and the expected shift in U.S. monetary policy.

Both of these transitions are necessary and healthy, but they are impacting other countries across the globe through trade, exchange rates, asset markets, and capital flows—what we call spillovers, she added.

Emerging market and low-income countries that are heavily dependent on commodity revenues will be particularly affected.

“While these uncertainties and transitions may look daunting, I believe they can be managed—with the right mix of policies to support demand, strengthen financial stability, and implement structural reforms. All these are necessary balancing acts.”

At the same time, they may not be enough, Largarde said, calling for specific policy upgrades.

“For instance, central banks in advanced economies should give due consideration to the risks of spillovers from their policy decisions; emerging economies should firmly address the buildup of corporate leverage and foreign debt,” she added.

Lagarde’s statement can be viewed here