The global economy is strong and growing, but trade tensions and complacency are a growing risk in the face of gathering economic storm clouds IMF Managing Director Christine Lagarde warned Monday in Washington, DC.
She delivered the Annual Meetings ‘Curtain Raiser’ speech ahead of the Annual Meetings in Bali to outline the key risks and challenges facing the global economy Monday from the IMF headquarters.
Although economic conditions are generally strong, she suggested that growth may have slowed from the latest projection of 3.9% globally last announced in July.
“A year ago, I said, ‘the sun is shining, please fix the roof.’ Six months ago, I pointed to clouds of risk on the horizon. Well, it is not pouring but there is a bit of a drizzle because today, some of those risks have begun to materialize,” she said.
“Indeed, there are signs that global growth has plateaued. It is becoming less synchronized, with fewer countries participating in the expansion,” she added.
Lagarde warned that rising debt may constrain the ability of countries to deal with the next economic downturn, when it inevitably strikes.
“My key message today is that we need to manage the risks, step up reforms, and modernize the multilateral system. Or, to put it in shipping terms, we need to steer the boat, not drift. "
Particularly worrisome is growing use of trade barriers and threats of retaliation, Lagarde said.
“History shows that, while it is tempting to sail alone, countries must resist the siren call of self-sufficiency—because as the Greek legends tell us, that leads to shipwreck.
The IMF has advocated for modernization of the system of global trade, Lagarde said.
“Going forward, what we need are “smarter rules” for trade that ensure all can gain. We need to fix the system, yes, it is needed! But not to destroy it."
The IMF and World Bank hold their Annual Meetings in Bali, Indonesia from October 11-13.
A full transcript and copy of the speech can be found at IMF.org.