The IMF hopes that countries can work cooperatively to reduce trade tensions and to reverse a ‘synchronized deceleration’ of global growth, Managing Director Christine Lagarde said Wednesday (June 5) in Washington.
Appearing at the American Enterprise Institute think tank, Lagarde said that while global economic growth is still positive, she maintains that the situation is fragile and precarious with IMF figures show that the rate of improvement is slowing.
“We are now seeing this sort of synchronised deceleration of growth which is shared by about 70 percent of total GDP around the world. So that fragility is still the same. It’s a little bit differently distributed than what we had assumed. So most recently the results for the US economy have been slightly better than what we had anticipated. Slightly better also the European Union. But on the other hand, some of the emerging market economies have been lower than we had thought.”
Part of that slowing is due to uncertainty brought on by trade tensions she told AEI resident fellow Desmond Lachman.
“You know one of the risks that we had identified is the risk associated with trade tensions and two months ago we said be very careful what you are doing with this major growth engine that is trade because anything that breaks on trade such as tariffs such as non-tariff barriers is going to actually be a brake on growth. And unfortunately we’re seeing some materialization of these risks.”
Lagarde said that the IMF put the risk to growth at half-a-percent shaved off global growth, roughly the equivalent of eliminating the entire GDP of South Africa in lost opportunity.
“And if you combine the two and you aggregate what is already in place and what will. Impact trade only dealing with China let alone Mexico which is a more recent development and we which we have not included in that particular surveillance note that alone would shave off the forecast that we have. By point 5 percent.”
And responding to a question about what can be done to help Venezuela, Lagarde stated that there has been no formal request for aid from the government, but the scope of need is immense.
“All we can do is from a distance and based on sporadic information and contacts that we have with a few people who are still on the ground is trying to assess what in our view based on what we’ve seen is likely to be just the most difficult protracted and complicated economic situation that we have seen and not just economy. Because you have a humanitarian crisis you have a food crisis. You have a currency crisis. You have inflation which is in the million’s percent. And the debt situation which is extremely complex as well, so you have to bring this all together. It’s like having, you know, you take the three worst cases of crisis resolution that we have ever handled in the history of the IMF. You bring them all together and that is Venezuela.”