Resolve and Determination—How We Get Out of This Together
IMF Blog, September 27, 2011
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Bibliographic details
- Authors: Christine Lagarde
- Published: September 27, 2011
Meeting overview and context
- Speaker: Christine Lagarde
- Date: September 27, 2011
- Event: 2011 Annual Meeting of the IMF and World Bank in Washington D.C.
- Participation: 187 countries attended, including finance ministers, central bank governors, businesspeople, civil society, labor leaders, and parliamentarians.
- Central message: A shared sense of urgency, a shared diagnosis of problems, and a shared sense that the steps needed are coming into focus.
Sense of urgency — key findings
- IMF forecasts released during the Meeting project global growth to slow to 4 percent this year and next.
- Advanced economies projected to manage only an anemic 1½‑2 percent.
- Risks are rising due to a negative feedback loop between weak growth, weak balance sheets (of governments, banks, and households), and weak political commitment.
- This dynamic has fueled a crisis of confidence with economic and social costs.
- Geographic risk concentration: clouds darkest over Europe; significant uncertainty remains in the United States.
- Global interconnection emphasized: shocks in advanced economies affect diverse actors worldwide (examples cited: the Kenyan farmer, the Brazilian designer, the Chinese entrepreneur).
Shared diagnosis — responsibilities and priorities
- Core priority: break the vicious cycle of weak growth and weak balance sheets feeding off each other.
- Advanced economies are central to an effective resolution, especially the United States and Europe.
- United States: adopt a credible medium- and long-term fiscal deficit reduction strategy; deal urgently with high unemployment; relieve pressure on overly-indebted households.
- Europe: address inter-linked problems of sovereign and bank debt together; Euro-area determination to “do whatever is necessary” was noted as encouraging.
- Emerging market economies: play a major role in global rebalancing—external surplus countries should rely more on domestic demand; countries with current account deficits should take action to ward off overheating.
- Low-income countries: rebuild policy buffers used during the crisis and invest in growth and employment creation.
Actions needed — policy areas and recommendations
- Policymakers called for “exceptional vigilance, coordination and readiness to take bold action.” Recommended policy areas:
- Fiscal policy
- Navigate twin threats of undermining credibility or undercutting recovery.
- Advanced countries need fiscal consolidation as a matter of priority.
- Pace of consolidation: must neither be too hesitant nor too hasty; approach must be country-specific.
- Monetary policy
- Remain accommodative given generally well-anchored inflation expectations in advanced economies.
- Central banks should stand ready to return to unconventional measures as needed.
- Financial sector reform
- Strengthen bank balance sheets so banks can continue lending to fuel growth.
- Implement stronger and more consistent financial regulation.
- Structural reforms
- Boost competitiveness and growth beyond the immediate crisis.
- Pay attention to the social dimension—growth should support jobs and benefit the whole of society.
- Cross-cutting imperative: implementation, implementation, implementation.
IMF role and commitments
- The IMF will support member countries as they take needed actions.
- An Action Plan was put forward focused on:
- Making IMF economic analysis and policy advice more effective.
- Further strengthening the lending toolkit and the global financial safety net.
- Continuing to provide technical assistance and training.
Closing call to action
- The shared sense of purpose emerging from the Meeting is important for the global economy.
- Follow-through by all concerned is critical and must occur in the weeks ahead, not years.
- Final exhortation: “We are all in this together—we can only get out of it together.”
Content from: Resolve and Determination—How We Get Out of This Together (Christine Lagarde), September 27, 2011.
Content in this bundle
- Managing Director’s Action Plan