Speech

The Task of Building Stronger, More Inclusive Growth

March 18, 2017

Good morning. My task today is to provide an overview of the global economy in five minutes. That is a lot of ground to cover. So let me begin with the bottom line: global growth is gaining momentum. But we can do better. Specifically, we can make growth stronger, we can share its benefits more widely, and we can do this best by working together.

On the global outlook, earlier this year we projected that growth would rise from 3.1 percent last year to 3.4 percent this year, and 3.6 percent in 2018.

Emerging markets remain the main source of growth. Indeed, for each 1 percentage point of global growth, about 0.7 percentage points is expected to come from emerging markets. Asia continues to lead the way, with continued solid growth in China, India, and Indonesia.

We are expecting a pickup in the United States, where we see some fiscal stimulus. We also see Europe continuing its slow recovery. This is all good news.

But the world is also facing significant downside risks.

One immediate challenge stems from concerns about a sharp tightening of financial conditions—related, perhaps, to rising U.S. interest rates. That could trigger higher levels of capital outflows from emerging market countries. Let me emphasize that I am talking about a potential problem and not a prediction.

Another challenge comes from political developments. These include the backlash against economic integration, war and terrorism, and refugee flows.

A more fundamental challenge is the need to lift growth to the higher levels that the world needs, but, most importantly, in a way that can enable everyone to benefit from that growth. To do this, we have to act on policy issues that have hung over the world economy since the 2008 crisis. For advanced economies struggling with weak growth, that means monetary or fiscal policies to help reignite demand. It means addressing the problems of their indebted companies and banks.

But the need for economic reforms involves all countries, including the emerging markets. This includes China, where the rebalancing effort is key for the transition to more sustainable levels of growth. A transition that is good for China is also good for the world.

So how do we make growth stronger and more inclusive? We know that growth comes from innovation and efficient allocation of resources. But we also know that the forces of change cannot proceed without being disruptive. If not addressed well, we will likely see more economic and political consequences.

For individual countries, this means that more must be done to assist those being left behind. More growth from the reforms I have just described will make a big difference. But there is also a need for education and training, and stronger social safety nets. Many people need a helping hand to succeed.

To summarize, it is essential that we work together. The international community must reinforce its commitment to economic cooperation. This is how we can maximize the benefits of growth and global integration. This is how we can create opportunities for all people. The IMF is committed to this effort.

Thank you very much.