The International Monetary Fund meeting in Washington next week takes place at a time of growing uncertainty for the world economy.
Both advanced and emerging economies are struggling to maintain growth rates, while the IMF is alarmed at the growing levels of public debt round the world.
Ahead of the Spring meeting, Christine Lagarde, the IMF’s managing director, called on member-countries to adopt three top-priority commitments to head off a global slowdown – or worse. These were, first, to resist the temptation to put up trade barriers; second, to put public-sector debt on a downward path and strengthen financial stability; and third, to promote growth, through economic reform, not least in labour markets and the services sector.
The fear is that the economic weather is already taking a turn for the worse. While Ms Lagarde said that “we continue to be optimistic” about world growth, she added that “we can see darker clouds looming”.
Advanced economies are projected to return to disappointing medium-term growth, which, she said, “would worsen economic inequality, debt concerns and political polarisation”. Meanwhile, more than 40 emerging-market and developing countries are forecast to expand more slowly in terms of output per head than advanced economies. “This means slower improvements in living standards and a widening income gap between those countries and the advanced world,” added Ms Lagarde.
Fears of a worldwide slowdown were echoed today by leading British economist Graeme Leach, who warned that the weakening growth in the money supply “could have profound implications for the global economic outlook”.
The backdrop to the Fund meeting includes a gradual normalisation of interest rates, which have been at rock-bottom levels since the 2008 financial crisis. In the US, Britain and the eurozone, monetary policy is gradually being tightened, but an economic downturn could put this process into reverse.
Urging all countries to resist protectionism, Ms Lagarde said: “History shows that import restrictions hurt everyone, especially poorer consumers.” Turning to debt levels, she said: “After a decade of easy financial conditions, global debt – both public and private – has reached an all-time high of $164 trillion.”
In terms of promoting growth, one potential “game-changer”, she said, would be for administrations around the world to embrace the potential of digital government.
Finance ministers and central bankers will gather in the US capital over the weekend ahead of the formal opening of the Spring meeting on Monday. It will run until April 22 in parallel with that of its sister-institution, the World Bank.
Globally, the economic picture may be clearer by the time of the IMF annual meeting 2018 in the autumn.