Global Economy in Sweet Spot, But Risks Remain: IMF

Date: 27 January 2018 - 21:47

News ID: ۴۹۳۷۸

DAVOS (The Economic Times) - IMF chief Christine Lagarde has said the global economy is in a sweet spot with all major economies doing well, though risks remain in the form of U.S tax rate cuts, growing inequality and lack of international cooperation.
"All major developed and developing economies are doing well and let's celebrate that. There may be some policies that may be debated in some parts of the world, but in the end they seem to have worked for now for growth," Lagarde said.
Speaking at a session on global economic outlook here on the last day of the World Economic Forum (WEF) annual meeting, she said what could go wrong would include the risks that emanate from the U.S. tax rate reforms and excessive inequalities that are growing in many areas.
Other risks include lack of global cooperation and the resulting geopolitical fractions, she added.
"The global economy is in a sweet spot with around 120 countries set to see strong growth in 2018. Confidence is due to a cyclical upswing and mostly good monetary and fiscal policies," the IMF managing director said.
Lagarde also listed financial risks as among the key risk factors to her positive outlook for global economy.
Speaking in the same session, Bank of England Governor Mark Carney said the global recovery is getting stronger and broader, with wages firming and economies moving to full employment.
Carney denied that central bank policies are creating a dangerous bubble in asset prices.
In reply to a question, he said the risk of another asset crash is quite low and the banking system has the liquidity to cope with shocks.
He said more investment relative to savings is leading to monetary normalization and for central banks, there is a regime shift towards normalization.
"In a pre-crisis world, the coverage of short-term liability for central banks was 10% and now it is 110%," he added.
She said the IMF thinks complacency is "one of the major risks'' to the global outlook.
Responding to a question on U.S. President Donald Trump's indirect comments earlier in the day on China's trade policies, Lam said trade wars pose big risks.
She also said China is still a developing economy and its trade with the rest of the world will become more equitable over time.

******Christine Lagarde, Managing Director of the International Monetary Fund, and Bank of England Governor Mark Carney attend the World Economic Forum (WEF) annual meeting in Davos.