Here’s a warning for the global economic outlook, issued by the International Monetary Fund: the US, UK and India cannot alone relaunch the world’s economy — but “don’t worry, it's not armageddon”.
Point of view
If Europe intensifies its efforts in supporting growth today and supporting growth tomorrow, I think it can create a much better future.
The IMF forecasts average global growth of 3.5% this year.
Managing Director Christine Lagarde, from Washington headquarters, called this mediocre and insufficient, reiterating observations made ahead of the IMF-World Bank Spring Meetings April 17-19 in Washington.
Overshadowing, perhaps even contradicting, the IMF forecast, growth in emerging countries, notably in Latin America, has slowed for a fourth year. The latest prediction for them overall is less than one percent.
She said: “Brazil, for instance, is flat, and forecast to be slightly negative this year. China is slowing down, and foreseeably so, and I think it’s a determined approach and policy determination. Russia is not doing well at all, and is in negative territory for obvious reasons — oil, sanctions and the like.”
Lagarde underscored that the wounds of the financial crisis have yet to close in many parts of the world, while granting there are some grounds for optimism.
“The macroeconomic risks have declined. We still have risks. But if you look at a few bright spots, you will see that the US economy, for instance, is recovering quite strongly and we are seeing quite positive signs going forward. We are seeing that, in Europe, the UK is clearly holding very strongly."
Lagarde had nice things to say about the euro currency zone, as well, although she spoke against basing any upswing solely on relaxing monetary policies. More than a dozen central banks have moved to stimulate economies and stave off deflation recently, including the Swiss, Danes, Swedes, Chinese and Koreans.
“The euro area is also showing signs of recovery, and much better than what we had seen lately. And Japan coming out of a slight recession is also forecast to be on the rise.”
Lagarde encouraged Greece to shoulder its responsibility to restore economic stability. She referred to technical detail and credible on-time implementation.
“It’s done by actually looking at measures, committing to reforms, measuring what the outcome will be. It’s the tedious work of financial ministers, wherever they are, and the lenders.”
Questioned about allowing Athens to pay later, Lagarde said: “We have never had an advanced economy asking for payment delays,” signalling the International Monetary Fund will protect its reputation.
We spoke to David Lipton, Lagarde’s First Deputy Managing Director, at the IMF headquarters.
Stefan Grobe, euronews: “Let me start by asking you about the global economy. Growth remains slow because of some substantial risks. Some of them are: high debt, high unemployment and lacklustre investment. But there is also the aspect of global insecurity. We see violence, civil war and terror in the Middle East, Africa, Ukraine. To what extent does that threaten global recovery?”
David Lipton, IMF First Deputy Managing Director: “We are in a situation where we see more global hot spots and threats to security than we have seen in quite a long time, perhaps in almost a generation. But I think so far we have not seen these events have an impact that we would call global. There are regional effects, whether that’s the conflict in Ukraine or the Middle East. We don’t see global effects.”
euronews: “How do you see the situation in Europe?”
Lipton: “Europe has climbed out of recession. The euro zone is starting to grow again. This is in part because of the very important and beneficial impact of the oil price decline, but it is also because of the measures that have been taken to support the economy, especially the very supportive approach of the European Central Bank. But this is a moment of opportunity where, if Europe intensifies its efforts in supporting growth today and supporting growth tomorrow, I think it can create a much better future.”
euronews: “I want to ask you about Greece. Nobody really knows when Greece will run out of money. The general guess is: soon. The negotiations between the creditors and Greece don’t show any progress at all, and many put the blame on the Greeks. The IMF is part of that process. What is your message to the Greek government?”
Lipton: “If we can continue our dialogue with them and intensify it and come to some agreement about the policies the government will pursue to solve their problems, then there are ways to provide finance that will diminish this looming crisis of liquidity. We are not suggesting that they have to approach solving Greece’s problems in the same way as the predecessor government. They ran on a platform of a new approach. But we do need to get down to what approach they will take and specify really in enough detail for the world, the IMF and the member countries to be comfortable that they are tackling the problem.”
euronews: “Finally, on Ukraine, the IMF just recently approved $17 billion of fresh funding to Ukraine. Critics say the IMF is putting good money at risk, because the Ukrainian government is not serious about fighting corruption, not serious about reform. What do you tell these critics?”
Lipton: “This is a Ukrainian government that is very reform-oriented. There are countries we go to where we have to pressure governments to adopt reforms. This is a government that is eager to adopt reforms. They see the challenge and threat to their country right now. They see the history of too many failed reform efforts and too many disappointments. Their population, given the challenges the country faces, is more ready to accept reform. So, they are ready to move forward. So we are trying to help.”