IMF communiqué: Trade, debt seen as threats to global growth

In Photo: International Monetary Fund (IMF) Managing Director Christine Lagarde accompanied by Lesetja Kganyagothey, International Monetary and Financial Committee (IMFC) chairman and South Africa’s Reserve Bank Governor, attend the IMFC conference during the World Bank/IMF Spring Meetings, in Washington, on April 21.

The global growth outlook faces rising threats from trade tensions and mounting debt despite a strengthening and “increasingly broad-based” expansion at the moment, according to a statement from world finance ministers and central bankers.

“Risks are broadly balanced in the near term, but remain skewed to the downside beyond the next several quarters,” according to a communiqué by the International Monetary Fund’s (IMF) main advisory committee, released last Saturday in Washington. “Rising financial vulnerabilities, increasing trade and geopolitical tensions and historically high global debt threaten global growth prospects.”

The concerns reflect what the IMF flagged in its updated World Economic Outlook.

The fund left its forecasts for global growth at 3.9 percent for this year and next, while warning that threats over trade could derail the strongest upswing since 2011. It also cautioned about the record-high $164 trillion in world debt.

The language in the International Monetary and Financial Committee (IMFC) statement represents a ratcheting-up of pessimism since the group’s last semiannual meeting last October, and goes further in some respects than a Group of 20 statement issued in March, just as President Donald J. Trump ramped up trade threats against China.

The communiqué also raises the idea that “demographic headwinds and subdued productivity growth may reduce the potential for higher and more inclusive growth going forward.”

In another change, the IMFC implicitly endorsed the Federal Reserve’s interest-rate increases, saying that “monetary accommodation should continue where inflation remains weak and be gradually withdrawn where inflation looks set to return to central bank targets.”

The previous IMFC statement in October said “monetary policy should remain accommodative, where inflation is still below target and output gaps are negative.”

The latest statement reiterates previous language that countries “will refrain from competitive devaluations, and will not target our exchange rates for competitive purposes.” The IMFC, the main advisory panel for the IMF, is composed of ministers and central bank governors from about two-dozen countries, including the United States and China. Policy-makers are gathered in Washington for spring meetings of the IMF and World Bank.

South African Reserve Bank Governor Lesetja Kganyago, who currently serves as the IMFC chairman, and IMF Managing Director Christine Lagarde will discuss the committee’s stance at a news briefing in Washington on Saturday.

Image Credits: AP/Jose Luis Magana

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