The head of the International Monetary Fund, Christine Lagarde came out on Tuesday pushing for improved action by world economies to boost growth alerting leaders that downside risks are increasing if decisive action is not taken.
Lagarde, who spoke at Frankfurt’s Goethe University identified specific moves such as improving European job training, increasing the US minimum wage and urging emerging economies to cut fuel subsidies whilst also boosting social spending.
She said following on from the 2007-2009 financial crisis growth has remained too slow and fragile which is increasing the risk to economies.
“Let me be clear: we are on alert, not alarm. There has been a loss of growth momentum.”
“However, if policymakers can confront the challenges and act together, the positive effects on global confidence – and the global economy – will be substantial.”
The global outlook has become more bleak over the prior six months due to China’s slowdown and an ongoing slump in commodity prices. Lagarde noted that emerging markets have pushed forward the recovery and expectations are that developed economies would continue the trend however this has not yet happened.
She said “downside risks remain and have probably increased” in developed economies due to legacies of debt, lower inflation, low investment, low productivity, and for some countries, low levers of employment.
Her speech comes just two weeks prior to senior officials, central bankers and policymakers meet in Washington for the IMF and World Bank Spring Meetings which will review the ongoing recovery of the world economy.