New IMF chief calls for action as global economy enters ‘synchronized slowdown’
Growing global trade tensions and financial vulnerabilities are undermining economic growth, which is expected to slowdown in nearly 90 percent of the world, the new chief of the International Monetary Fund (IMF) warned.
“The global economy is now in a synchronized slowdown. This widespread deceleration means that growth this year will fall to its lowest rate since the beginning of the decade,” Kristalina Georgieva, the IMF’s managing director said in her maiden speech on Tuesday.
Georgieva pointed to the dangers of trade disputes, which have caused global trade growth to come to a near standstill.
The effect of trade tensions could cause a loss of around $700 billion by 2020, or about 0.8 percent of global gross domestic product (GDP), she said.
Georgieva warned that the current economic rifts could threaten the interconnectedness of the world economy and have a long-term negative impact on future generations.
“There are a range of issues and one common theme: Fractures ... the current rifts could lead to changes that last a generation - broken supply chains, siloed trade sectors, a ‘digital Berlin Wall’ that forces countries to choose between technology systems,” Georgieva added.
Georgieva, who was elected as IMF chief late last month and took over on October 1, called for quicker action to find lasting solutions to build a better international trade system.
“The key is to improve the system, not abandon it,” she said.
With a world facing financial vulnerabilities, including public debt hitting near-record levels, Georgieva explained that monetary and financial policies need to be improved hand-in-hand with fiscal policies.
“Monetary and financial policies cannot do the job alone. Fiscal policy must play a central role. Now is the time for countries with room in their budgets to deploy – or get ready to deploy – fiscal firepower,” she said.
“In fact, low interest rates may give some policymakers additional money to spend ... That advice will not work everywhere,” she said.
On October 1, the World Trade Organization (WTO) slashed its growth forecast for global trade this year by more than half to 1.2 percent from 2.6 percent, citing heightened uncertainty due to trade tensions and a slowing economy.
Trade tensions between the United States and China, as well as trade conflicts between the US and European nations, have contributed to a global economic deadlock.
US officials are expected to meet a high-ranking Chinese delegation starting October 10 for a fresh round of discussions, aimed at easing the trade conflict between the world’s two largest economies.