Christine Lagarde, Managing Director of the International Monetary Fund (IMF), reveals many things happening in today’s world. Starting from the forecast of world economic growth, China to various policies taken by the President of the United States (US) Donald Trump.
The IMF has just revised its projected world economic growth, from 3.5% to 3.6%. In the midst of global uncertainty there is still an optimistic projection.
“What we see is that recovery is very strong,” Lagarde told a seminar in the series of IMF-World Bank Annual Meetings in Washington on Thursday (12/10/2017) local time.
Recovery has happened quite rapidly since the onset of the global financial crisis in 2007. This is driven by investment, consumption and trade. When divided by group of countries, the world economy is not only sustained by developing countries. But also developed countries.
The US is projected to grow 2.2% this year or higher than the realization of 2016 which amounted to 1.7%. Europe with 2.1% (from 1.8%), and Japan 1.5% (out of 1%).
“But the recovery is not really done yet,” he said.
Last year, Lagarde stated that 47 countries experienced negative growth, coupled with a row of countries that fall into the fragile category. Over the issue, some countries even hit social and political conflicts and harm the general public.
Therefore, according to Lagarde, this good condition must be perfected with long-term policy. So if there is turmoil in one country, whether because of economic or geopolitical problems, the impact received by other countries is not too big.
“It’s a good time to take a useful policy for society in general and recovery can take place on a sustainable basis,” Lagarde said.
There are some policies recommended by Lagarde. Among other things, the certainty of the run of recovery. As with the monetary side, there are policies that support sustainable recovery, while also managing the risks that can occur in the financial sector.
From a fiscal perspective, according to Lagarde, a country must be ensured in a sound financial account. Government spending should be directed to productive ones, such as infrastructure, social security, education and women’s access to employment.
“The state must also take advantage of this good situation by maintaining the ratio of debt to Gross Domestic Product (GDP),” said Lagarde.
Lagarde realized, the recovery is also full of challenges from within the country. For example, protecting the progress of financial regulatory reforms, addressing climate change, improving the global trading system to the impact of technology on employment.
China’s economic forecasts changed from 6.7% to 6.8%. The fiscal stimulus policies pursued by the Chinese government are beginning to have a positive impact, as the main factor.
Consumption economy is China’s priority for investment-based and exports. This is in line with efforts to cut the trend of economic slowdown from above 10% and then to 6% level due to the decline in global trade.
Lagarde reminded China to be quicker to prepare a policy of anticipation of high credit growth in recent times. The ability of parties to pay off matured debts must be carefully considered in order to avoid turmoil in global financial markets.
“SOEs’ reforms and continuing to keep pace with credit to control China’s financial risks are well-received by all,” Lagarde said.
As President of the United States (US) the presence of Donald Trump, bringing a great policy in the field of trade. Upon exiting the Trans-Pacific Partnership, Trump announced to review the North American Free Trade Agreement (NAFTA). NAFTA involves Mexico and Canada.
First, according to Lagarde, negotiations will definitely continue in this issue. The right position as a solution will be taken each side through the various maneuvering space available.
Secondly, Lagarde explained, NAFTA has been going on since 20 years ago. So that does not mean there should be no evaluation of the countries involved. According to him need to record things that have been achieved and also miss the goal. Moreover, the trading system is now experiencing significant changes.
“Yes we 20 years ago communicate with mobile phones using digital for various activities? Maybe not, so when there is this negotiation, then please proceed,” he concluded.