IMF Survey : Lagarde Sets Out Global Policy Actions to Stay Ahead of Crisis
IMF News, April 10, 2013
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Bibliographic details
- Published: April 10, 2013
Overview and context
- Publication date: April 10, 2013
- Speaker: IMF Managing Director Christine Lagarde
- Event referenced: Speech at the Economic Club of New York
- Context: Remarks made ahead of the IMF-World Bank Spring Meetings taking place April 19-21 in Washington, involving economic policymakers from the IMF’s 188 member countries.
- Central message: Global policymakers must act to get ahead—and stay ahead—of the crisis; improvements in financial markets have not translated into sufficient improvements in the real economy and people’s lives.
Assessment of the global economy
- Recent trend: “the global economy had shown signs of strengthening since six months ago”
- Near-term outlook: “yet, global growth is not expected to be much higher this year than last”
- Risk environment: “We are seeing new risks as well as old risks.”
Three-speed global economy (classification)
- Group 1 — Doing well:
- Mainly the emerging markets and developing countries.
- Group 2 — On the mend:
- Including the United States.
- Group 3 — Still have some distance to travel:
- Such as the Euro Area and Japan.
Policy priorities and actions by group
- Emerging markets and developing economies:
- Concern: potential fallout from exceptionally loose monetary policy in advanced economies.
- Recommended actions:
- Boost defenses including by rebuilding fiscal policy space.
- Step up banking sector regulation and supervision.
- Note: “advanced economies also bear some responsibility in terms of delivering a better fiscal policy and more financial repair.”
- United States:
- Observation: “While the fiscal cliff had been avoided, the United States needs a more balanced fiscal policy, which is now too aggressive in the short term and too timid in the medium term.”
- Recommended action: Put in place a credible medium-term roadmap to bring down the debt.
- Euro Area:
- Priority: Clean up the banking system by recapitalizing, restructuring, or—where necessary—shutting down banks.
- Complementary action: Make progress with banking union.
- Japan:
- Assessment: “Japan’s recently-announced framework of ambitious monetary easing is a positive step”
- Recommended complementary actions:
- Lower the public debt.
- Implement structural reforms to shift the economy into higher gear.
Overarching global issues and cross-cutting recommendations
- Financial sector reform:
- Guiding principle: “We simply cannot have pre-crisis banking in a post-crisis world.”
- Areas for further progress: regulation of too-big-to-fail, derivatives, and shadow banking.
- More balanced global demand:
- Call for action from surplus countries, including:
- Strengthening investment in Germany.
- Strengthening consumption in China.
- Emphasis on growth, jobs, and equity:
- Priority: Job creation as an urgent priority.
- Quote: “Job creation is an urgent priority. Without this, we risk a wilderness of wasted potential and ruined ambition—especially for a generation of young people.”
- Instruments: Growth-led strategies and targeted labor market policies to spur job creation more directly.
Source: IMF Survey : Lagarde Sets Out Global Policy Actions to Stay Ahead of Crisis (April 10, 2013).