{ "title": "Boosting Growth and Adjusting to Change", "publication": "IMF News, September 28, 2016", "sourceUrl": "https://www.imf.org/en/news/articles/2016/09/27/am16-sp09282016-boosting-growth-adjusting-to-change", "canonical": "https://www.imf.org/en/news/articles/2016/09/27/am16-sp09282016-boosting-growth-adjusting-to-change", "overlayPath": "/en/news/articles/2016/09/27/am16-sp09282016-boosting-growth-adjusting-to-change/index.md", "summary": "Emerging and developing countries are home to 85 percent of the world’s population and have seen progress: child mortality is down, life expectancy is up, absolute poverty has declined, school enrollment is on the rise.", "publishDate": "2016-09-28", "sections": [ { "heading": "The State of the Global Economy: Still Weak and Fragile", "content": "- Emerging and developing countries are home to 85 percent of the world’s population and have seen progress: child mortality is down, life expectancy is up, absolute poverty has declined, school enrollment is on the rise.\n- Digital access: Six billion people now have access to a cell phone, and 3½ billion can access the internet.\n- China is rebalancing and “will continue to grow at a robust rate of about 6 percent.”\n- India is “also embarking on significant reforms, at more than 7 percent.”\n- Emerging and developing countries will continue to contribute more than three-quarters of total global growth this year and next.\n- Signs of improvement: Russia and Brazil are showing some signs of improvement after severe contraction.\n- Major vulnerabilities and headwinds:\n - Advanced economies: overall growth outlook remains subdued; U.S. had a setback in the first half of 2016 leading to a downgrade in the IMF U.S. forecast, though employment news was relatively good with hopeful signs of falling poverty and rising median incomes in 2015.\n - Euro area: growth remains sub-par, with strain from high debt and bank weaknesses.\n - Japan: small rebound but needs difficult reforms to maintain momentum.\n - Commodity exporters and many low-income Sub-Saharan African countries hit by low commodity prices.\n - Middle East: continued suffering from conflict and terrorism.\n - Global risks: diverging monetary policy paths could trigger financial market volatility; low productivity growth and high debt could depress investment; geopolitical events such as terrorism and refugee surges pose hard-to-quantify risks.\n- Trade: trade growth fell below global GDP growth after 2008; increase in protectionist trade measures over the past five years plays a non-trivial role." }, { "heading": "Adjusting to Change: Do No Harm", "content": "- Core message: “First, do no harm.”\n- Positive impulses behind recent improvements include supportive monetary conditions, improved financial regulation and oversight, and deliberate structural reforms.\n- Caution against protectionism:\n - Restricting trade would choke off a key driver of growth, deny families and workers economic opportunities, disrupt supply chains, raise the cost of basic goods, and disproportionately hurt the poor while worsening real income inequality.\n - Need to reverse trend toward protectionism by completing multilateral trade agreements and pushing reforms in services and areas of the \"new economy\" such as regulatory cooperation and intellectual property rights.\n- Inclusive growth: policy must ensure gains from trade are widely shared and support those at risk of losing out.\n- Policy tools and examples that help inclusion:\n - Public investment in education raises growth and human capital; education of girls is a proven high-return investment.\n - Programs pairing retraining with active job counseling (example: some Nordic countries) shorten unemployment duration.\n - U.S. measures advocated by the IMF: raising the minimum wage and extending the earned income tax credit.\n- Emphasis: no silver bullets; combination of measures needed to keep globalization working for the next generation." }, { "heading": "Boosting Growth: The Immediate Response", "content": "- Objective: emerge from the “new mediocre” of low growth, low inflation, and low interest rates by using structural, fiscal, and monetary policies in a mutually reinforcing, country-specific way.\n- Three-pronged strategy:\n 1. Structural reforms\n - Identify reforms that deliver the largest growth and productivity effects relative to political capital required.\n - Example: breaking down monopolies in retail and professional services has had positive effects on growth, especially during downturns.\n - Structural reforms should be supported by macroeconomic policies to accelerate short-term growth effects and improve political feasibility.\n 2. Fiscal policy\n - Invest in modern public infrastructure: roads, airports, power grids, high-speed internet.\n - Low-interest environment provides historic opportunity to finance necessary investments and boost growth.\n - Not calling for broad-based fiscal stimulus for all; principle: countries with fiscal space should use it (examples given: Canada, Germany, Korea).\n - For countries with stretched public finances, reallocate spending within existing envelopes (example: replace current spending with tax credits on R&D to support technology and innovation).\n 3. Monetary policy\n - Monetary policy in advanced economies needs to remain expansive at this stage.\n - Research shows monetary policy can add a further boost to GDP when infrastructure investment is debt-financed: “the impact on GDP would be almost twice as large and the debt ratio would fall, compared to the case without monetary support.”\n - Importance of adhering to medium-term monetary and budgetary frameworks to maintain credibility while allowing short-term expansion.\n- Coordination\n - Domestic-only policymaking has returned post-crisis; the “new mediocre” calls for a more sophisticated and coordinated global approach.\n - Principle: if all countries act decisively to stimulate growth, positive spillovers reinforce each other and everyone benefits more.\n - IMF to provide more detail on the benefits of coordination in a staff paper being released later today." }, { "heading": "Conclusion", "content": "- Bottom-line policy prescriptions:\n - First, do no harm: avoid restricting trade and limiting economic openness, which would worsen the growth outlook and harm the weakest citizens.\n - Rethink how growth can be made more inclusive and act accordingly.\n - Stronger, better growth is possible by using monetary, fiscal, and structural policies in concert—within countries, across countries, and consistently over time—so the whole is greater than the sum of the parts.\n- IMF role: assist countries in identifying fiscal space, medium-term anchoring, and sequencing of necessary reforms.\n- Closing thought: winning the “championship of growth and inclusive globalization” requires teamwork and collaboration across the world.\n\nRemarks by Christine Lagarde, Managing Director of the IMF, Northwestern University, September 28, 2016.\n\n---\n\n\n References\n\n- Christine Lagarde\n- People's Republic of China and the IMF\n- United States and the IMF\n- Speeches\n- PRESS CENTER\n- Time for a Supply-Side Boost? Macroeconomic Effects of Labor and Product Market Reforms in Advanced Economies\n- : Is It Time for an Infrastructure Push? The Macroeconomic Effects of Public Investment\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2016/09/27/am16-sp09282016-boosting-growth-adjusting-to-change" } ], "bullets": [ "[Markdown version](/en/news/articles/2016/09/27/am16-sp09282016-boosting-growth-adjusting-to-change/index.md)", "[Structured JSON version](/en/news/articles/2016/09/27/am16-sp09282016-boosting-growth-adjusting-to-change/index.json)", "[Bundle manifest](/en/news/articles/2016/09/27/am16-sp09282016-boosting-growth-adjusting-to-change/bundle-manifest.json)", "Published: September 28, 2016", "Emerging and developing countries are home to 85 percent of the world’s population and have seen progress: child mortality is down, life expectancy is up, absolute poverty has declined, school enrollment is on the rise.", "Digital access: Six billion people now have access to a cell phone, and 3½ billion can access the internet.", "China is rebalancing and “will continue to grow at a robust rate of about 6 percent.”", "India is “also embarking on significant reforms, at more than 7 percent.”", "Emerging and developing countries will continue to contribute more than three-quarters of total global growth this year and next.", "Signs of improvement: Russia and Brazil are showing some signs of improvement after severe contraction.", "Major vulnerabilities and headwinds:", "Trade: trade growth fell below global GDP growth after 2008; increase in protectionist trade measures over the past five years plays a non-trivial role.", "Core message: “First, do no harm.”", "Positive impulses behind recent improvements include supportive monetary conditions, improved financial regulation and oversight, and deliberate structural reforms.", "Caution against protectionism:", "Inclusive growth: policy must ensure gains from trade are widely shared and support those at risk of losing out.", "Policy tools and examples that help inclusion:", "Emphasis: no silver bullets; combination of measures needed to keep globalization working for the next generation.", "Objective: emerge from the “new mediocre” of low growth, low inflation, and low interest rates by using structural, fiscal, and monetary policies in a mutually reinforcing, country-specific way.", "Three-pronged strategy:", "Coordination", "Bottom-line policy prescriptions:", "IMF role: assist countries in identifying fiscal space, medium-term anchoring, and sequencing of necessary reforms.", "Closing thought: winning the “championship of growth and inclusive globalization” requires teamwork and collaboration across the world.", "[Christine Lagarde](http://www.imf.org/external/np/omd/bios/cl.htm)", "[People's Republic of China and the IMF](http://www.imf.org/external/country/CHN/index.htm)", "[United States and the IMF](http://www.imf.org/external/country/USA/index.htm)", "[Speeches](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[Time for a Supply-Side Boost? Macroeconomic Effects of Labor and Product Market Reforms in Advanced Economies](http://www.imf.org/external/pubs/ft/weo/2016/01/)", "[: Is It Time for an Infrastructure Push? The Macroeconomic Effects of Public Investment](http://www.imf.org/external/pubs/ft/weo/2014/02/)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2016/09/27/am16-sp09282016-boosting-growth-adjusting-to-change/index.md", "json": "/en/news/articles/2016/09/27/am16-sp09282016-boosting-growth-adjusting-to-change/index.json", "bundleManifest": "/en/news/articles/2016/09/27/am16-sp09282016-boosting-growth-adjusting-to-change/bundle-manifest.json" }, "generatedAtUtc": "2026-09-25T20:11:55.670Z" }