HONG KONG: The world economy must avoid being sucked into a protectionist spiral that undermines the momentum of global growth, International Monetary Fund Managing Director Christine Lagarde said.
The IMF remains optimistic about global growth prospects, Lagarde said recently in a speech in Hong Kong ahead of next week’s annual spring meetings of the fund’s 189 member nations in Washington. The world economy is benefiting from surging investment, rebounding trade and favorable financial conditions, all of which are encouraging companies and households to step up spending, Lagarde said.
The IMF will update its global forecast April 17. The fund said in January it expects the global economy to grow 3.9 percent this year and next.
Still, Lagarde warned that threats loom, most notably a surge in protectionism. “Yes, the current global picture is bright. But we can see darker clouds looming.”
Lagarde said the rise of the global trading system reduced extreme poverty, cut living costs and created millions of high-paying jobs. “But that system of rules and shared responsibility is now in danger of being torn apart,” she said. “This would be an inexcusable, collective policy failure.”
Fears of a trade war between the world’s two biggest economies will loom large next week as Finance Ministers and Central Bankers from IMF member countries meet in Washington. The fund was conceived during the Second World War to promote open markets and discourage the “beggar-thy-neighbor” policies that took root during the Great Depression.
Without referring directly to the U.S. or China, Lagarde warned that import restrictions hurt everyone, especially poor consumers. Such barriers prevent trade from playing its “essential” role in boosting productivity and diffusing new technologies, she said.