Towards a More Secure Recovery Shared by All

IMF News, October 13, 2017

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Towards a More Secure Recovery Shared by All

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• Published: October 13, 2017

Global outlook and opening assessment

• Global growth is expected to be stronger this year—3.6 percent.
• Positive momentum is expected to continue into 2018.
• The upswing is broad-based: involving 75 percent of the global economy, as measured by GDP.
• The recovery presents an opportunity to secure and expand growth to those not yet benefiting and to include those at risk of exclusion.
• More than 40 emerging and developing countries—representing about 15 percent of the world’s population—are currently experiencing declining per-capita income.
• Key risks and constraints include geopolitical tensions, political uncertainty, and recent devastating natural disasters.

Priority 1 — Focus on the economic fundamentals

• Policy mix recommendation: use a tailored mix of monetary, fiscal, and structural policies to consolidate the recovery and raise growth prospects.
• Monetary policy: manage a smooth normalization of monetary policy.
• Fiscal strategy: implement fiscal strategies that reduce high debt without hurting growth and confidence.
• Financial stability: guard against the build-up of financial vulnerabilities.
• Structural reform: reforms that lift productivity and potential output; IMF analysis shows labor and product market reforms are more potent during economic upswings.
• Expected outcomes: more growth, more jobs, more income if the opportunity is not missed.

Priority 2 — Address excessive inequality head-on

• Problem statement: excessive inequality hinders growth, erodes trust, and fuels political tensions.
• Fact: Today the top 1 percent owns about half of the world’s wealth.
• Policy directions:
  • Investments in people: health, education, life-long learning.
  • Stronger safety nets: more direct support for people and communities adapting to disruptions from technological change, trade, and the legacy of the global financial crisis.
  • Fiscal tools: some advanced economies could raise their top tax rates without slowing growth to provide resources for priority needs or debt reduction.
  • Gender inclusion: eliminate legal impediments and bias in taxation; provide support for greater participation of women in the labor market.
• Expected effects: increase growth, reduce inequality, and support diversity.

Priority 3 — Concerns of young people: corruption and climate change

• Corruption
  • Systemic corruption undermines trust and reduces growth potential.
  • Bribery alone costs more than 1.5 trillion dollars per year, nearly 2 percent of global GDP.
  • Money laundering and terrorist financing are threats to every economy; IMF has provided technical assistance to 120 countries in this area.
  • IMF analysis: moving from high to low perceived corruption levels can increase public investment efficiency by 50 percent—and raise real per capita income by nearly one percentage point.
  • IMF commitment: step up efforts in the fight against corruption and work with all members in an even-handed manner.
• Climate change
  • Young people list climate change among top concerns.
  • Low-income countries are disproportionately affected.
  • IMF estimate: a 1 degree Celsius increase in a country with an average annual temperature of 25 degrees—such as Bangladesh, Haiti, or Gabon—could reduce per capita GDP by nearly 1.5 percent.
  • Energy pricing: trillions of dollars are being spent on subsidies that drive carbon emissions.
  • IMF projection: global energy subsidies at $5.3 trillion for 2015, or 6.5 percent of GDP.
  • Policy prescription: reduce and eliminate energy subsidies; “to get it right, we need to price it right.”

International cooperation and the IMF’s role

• Collective action: international cooperation is essential to address global challenges (natural disasters, trade restrictions, cybercrime, Sustainable Development Goals).
• IMF “AIM” objective: an IMF that is more Agile, Integrated, and Member-focused.
• Recent IMF operations and outputs:
  • Provided support to 16 countries via lending programs for a total of more than US$27 billion, including through the rapid credit facility.
  • Strengthened surveillance, including new analysis on fintech and its impact on financial intermediation and monetary policy.
  • Conducted 127 country consultations with topical analysis (examples: gender analysis in Rwanda; climate change resilience in Seychelles; inclusion and tax reform in the United States).
  • Deployed thousands of missions to help raise public revenue more efficiently, monitor public spending, manage debt, and regulate financial markets.
  • Trained nearly 30,000 individuals through free online economics courses.
  • Provided technical assistance and capacity development funded by more than 40 member countries.
• Forward agenda:
  • Progress toward the 15th quota and formula review to better represent members (will need members’ help).
  • Offer technical assistance to increase fiscal capacity, analyze macroeconomic implications of technology, and help low-income countries deal with conflicts and natural disasters.
  • New initiative: opened the “iLab” to signal openness to ideas.

Conclusion and institutional commitments

• IMF staff: talented and diverse staff representing over 150 nationalities.
• Core principle: trust—between the IMF and its members and among members—is central to addressing global challenges.
• Call to action: strengthen the multilateral system that has underpinned the world for more than seven decades through collective effort.

Source: Towards a More Secure Recovery Shared by All — 2017 Annual Meetings Plenary Speech by Christine Lagarde, October 13, 2017.

References

• Christine Lagarde
• United States and the IMF
• The IMF and Good Governance -- A Factsheet
• Technical Assistance -- A Factsheet
• Speeches
• PRESS CENTER
• https://www.imf.org/en/home