Opening Remarks by Christine Lagarde at World Economic Outlook Press Conference

IMF News, January 21, 2019

Source details

Canonical URL: Opening Remarks by Christine Lagarde at World Economic Outlook Press Conference

Event: World Economic Outlook Press Conference, Davos
Date: January 21, 2019
Presented: First time the World Economic Outlook Update is presented by Gita Gopinath, new Chief Economist.
Contact: IMF Communications Department MEDIA RELATIONS Phone: +1 202 623-7100Email: MEDIA@IMF.org

The IMF had previously cut its global growth forecast in October for 2019 and 2020, partly because of the negative effects of rising trade barriers.
Today the IMF is announcing a further downward revision of its forecast.
Bottom line: after two years of strong expansion, the world economy is growing more slowly than expected and risks are rising.

Risks are significantly higher and increasingly intertwined:
- Higher tariffs and rising uncertainty over future trade policy fed into lower asset prices and higher market volatility.
- These developments contributed to tightening financial conditions, including for advanced economies.
- Tightening financial conditions are a major risk factor in a world of high debt burdens.
Geopolitical worries and disappointing long-term growth prospects amplify downside risks.
Question addressed: "Does that mean that a global recession is around the corner?" — The answer given: "no"—but the risk of a sharper decline in global growth has certainly increased.

Core message: Address remaining vulnerabilities and be ready if a serious slowdown were to materialize.
For most countries, the recommended approach is to harness existing growth momentum to create more policy room to act, with three interrelated priorities:

Resilient
Reduce high government debt to open space to fight future downturns — but do so in a fair and growth-friendly way.
Monetary policy should be data-dependent.
Exchange rates should be allowed to act as shock absorbers.
Develop macroprudential toolkits to further financial sector stability.
Use this time for economic reforms to lift growth, especially in labor markets and infrastructure investment.

Inclusive
Ensure the digital revolution delivers for people in terms of productivity, employment, and long-term growth.
Help workers displaced by automation.
Create new and better opportunities for women and young people.

Collaboration
Effective international cooperation requires fairness, flexibility, and commitment to the common good.
Priorities for cooperation include: fixing the global trade system, fighting corruption and tax evasion, and addressing the existential threat of climate change.
The speaker calls for a "new multilateralism" to build a brighter future for all citizens.

The objective is to be in a better position for a downturn (which history suggests is "somewhere over the horizon") and for unexpected developments.
Urgency: The new outlook shows the need for enhanced international cooperation is more urgent than ever.

Opening Remarks by Christine Lagarde at World Economic Outlook Press Conference — Davos, January 21, 2019