The IMF Chief Christine Lagarde said that many world economies are going to have a slower economic growth this year, but she doesn't see a recession coming in the short term.
In a speech at the Chamber of Commerce, Lagarde said that the world economy has weakened since late January when the fund had to update its growth forecast. Calling this phenomenon “synchronized deceleration” she believes it’s something transitory and that the world economy may bounce back in mid-2019 or the beginning of 2020 though it may be "precarious" since the relevant risks are pushing the economy downwards.
This situation is mostly due to the uncertainty associated with the worldwide trade tensions, high debt levels and anxiety in the financial markets.
She recommended that world central banks to keep an accommodative monetary policy in places where the inflation levels are below the target. She also endorsed regulatory reforms to strengthen the financial markets and warned about the effects of keeping low-interest rates, having high public debt levels and imposing tariffs to each other.
“These are potentially self-inflicted wounds that should be avoided,” she said about tariffs, highlighting that they could curb the United States’ economy growth by up to 0.6 percent and China's by up to 1.5 percent.
Her declarations came right before the upcoming semi-annual meetings of the IMF and World Bank next week.
Third World Debt Repayments are Rising
According to the Jubilee Debt Campaign (JDC), debt repayments have doubled since 2010 for the world's poorest countries, forcing them to cut their public spending. A combination of factors, among them a stronger dollar and rising interest rates have increased debt repayments by 85% in the last eight years.
“The growing debt crisis needs urgent international attention. A vital first step is to require that all loans to governments are publicly disclosed, allowing parliaments, media and civil society to hold governments to account for new borrowing," said Tim Jones, the JDC's head of policy.
JDC's data also shows that public spending fell by 4% in the 15 countries with the highest debt repayments.
The IMF will be further discussing this situation during their spring meeting next week.