July 06, 2017 (LBO) – The International Monetary Fund has called for building of inclusive economies through structural reforms that lift incomes, ahead of the G20 summit in Hamburg this week.
IMF’s Managing Director Christine Lagarde warned of risks to global growth by pursuing national policies at the expense of international trade and steps to tackle climate change.
US president Donald Trump and his Russian counterpart Vladimir Putin are expected to meet for the first time at the summit in Hamburg, Germany.
“This summit opens with a sense of optimism. The upbeat mood stems from a global recovery that is now one year old and represents a welcome change from previous G20 meetings, where unsteady growth and downward revisions regularly cast a shadow,” Lagarde said in a blog post.
“A recent pickup in global manufacturing and investment activity signals that the recovery we projected in April remains on track. Our new forecast will be published in late July but we expect global growth to be around 3 and a ½ percent this year and next.”
The regional composition of growth has, however, shifted, she said.
In the United States — where the expansion is in its ninth year and cyclical unemployment has all but disappeared— a soft patch in early 2017 and policy uncertainty has tempered outlook.
The euro area — led by monetary stimulus and domestic demand — has exceeded expectations, and conditions in emerging economies have been boosted by robust growth in China and stabilizing conditions in Russia and Brazil, Lagarde added.
“Financial vulnerabilities present an immediate concern. After a long period of favorable financial conditions, including low-interest rates and easier access to credit, corporate leverage in many emerging economies is too high.”
“In Europe, bank balance sheets still need repair following the crisis. In China, a faster-than-projected expansion—if it continues to be fueled by rapid credit and increased spending—would potentially lead to unsustainable public and private debt in the future.”
No country is an island, Lagarde added, and policies taken by any nation can resonate stronger and last longer with coordination from the other G20 members.
“Sustained growth also means that now is the time to improve — not roll back — oversight and regulatory systems implemented in the aftermath of the crisis.”
“Above all, we need to focus on building inclusive economies. This calls for structural reforms to lift incomes and for more support to those who face disadvantages from technological changes and global economic integration.”