Speech

Opening Remarks by Christine Lagarde for the Annual Meetings Press Conference

October 11, 2018

Introduction

Good morning, Bonjour—selamat pagi. Welcome to the 2018 Annual Meetings!

On behalf of the IMF, I would like to express my sympathy, my condolences to the people of Indonesia and certainly to the families who have suffered losses and who are in distress at the moment.

I was in Lombok on Monday; my team was in Sulawesi the day before; and we could see on the ground the devastation caused by the tragic natural disasters. But we could also see the resilience, the courage, the determination of the Indonesian people and certainly as an institution, as a community, we are trying to help in whichever way we can.

And as I said in Balinese: IMF berdiri bersama anda (the IMF stands with you).

That spirit of solidarity and courage and resilience also demonstrates how a country can grapple with difficult economic circumstances and do so with success. Certainly, Indonesia is a clear example of that.

You will have seen not only the Global Policy Agenda, but you have also heard from our team yesterday and the day before on the World Economic Outlook, the Global Financial Stability Report, and the Fiscal Monitor. You will have seen our forecast as well as the risks that we see on the horizon.

So what I would like to do is to identify three key questions.

1. My first question: is the economy strong?

The answer to that is: yes, the economy is strong at the moment. But here is the real question: is the economy strong enough?

To that, our answer is: probably not enough, because we clearly see that growth has plateaued—we expect global growth to remain at 3.7 percent for three years in a row (2017-19). We also see that growth is spread more unevenly among countries.

Moreover, some of the risks that we have highlighted, particularly at our Spring Meetings in April, have now begun to materialize, especially from rising trade barriers. If these tensions were to escalate, the global economy would take a significant hit.

So our strong recommendation is to de‑escalate these tensions and work toward a global trade system that is stronger, fairer, fit for purpose, and fit for the future—because if services are not sufficiently covered, if digital transformation is not sufficiently covered in the current trade framework, then we are missing the point, and we are probably missing out on productivity gains that we could have.

2. My second question: is the economy safe enough?

The bottom line is this: ten years after the global financial crisis, we are safer, and measures have been taken, but we are not safe enough.

With global public and private debt at an all-time high, any slight change in the wind could provoke capital outflows and economic instability in emerging markets, as we see in some of those markets.

To guard against this, our recommendation is to encourage countries to use the right combination of domestic and global policies.

We also need to press ahead with the financial regulatory agenda—and resist backsliding. There has been a lot of progress over the past decade, but also an unfinished agenda—combined with the added challenges from continued financial innovation, which has its upside but also its downside.

A safer global economy also means tackling the issue of sustainability, including the existential threat of climate change. We know from our work done last year, especially in the World Economic Outlook, that low‑income countries and low‑lying countries are the first victims of climate change.

And we know, based on the new report from the UN Intergovernmental Panel on Climate Change, that time is of the essence and that we cannot afford to waste it.

3. My third question: are the benefits of growth shared enough?

The answer to that is: the benefits of stronger growth are not shared enough for our global economy to continue to grow in a sustainable way.

As our research has shown, excessive inequality—whether it is caused by technology, trade, global integration, or policies favoring capital over labor—is magnifying economic and social tensions, especially in advanced economies.

As I said in my Curtain Raiser speech last week, we need to steer the boat, not let it drift!

That means using the current growth momentum—because we still have it—to implement the right policy actions in the areas that I have just outlined.

To achieve these goals, we will need stronger international cooperation as well. There is a beautiful Balinese phrase that captures that spirit—menyama braya, “everyone is a brother or sister.”

So we are joining hands. We are on that same boat, which we need to steer, not let it drift. We would do well to take that to heart.

With that, I am happy to take your questions.

Thank you—Terima Kasih.