Welcome to the real world! For one more indirect time the International Monetary Fund “admits” what it has been wrong in its economic policies. And tries to find out what went wrong. It sees no growth, but bleak future. And keeps the whole problem on a pure academic level. Speaking at an event of the Council of Americas, Managing director Christine Lagarde said among others that:
“Global growth is disappointing and uneven. Medium-term growth prospects have become weaker.”
Excerpt from Lagarde’s speech on the stand of global economy:
1. Where do we stand?
Let us start with the state of the global economy; and then focus on some of the transition issues underlying it.
State of the Global Economy
Our World Economic Outlook numbers will be released next week, but I can already tell you this: global growth will likely be weaker this year than last, with only a modest acceleration expected in 2016.
The good news is that we are seeing a modest pickup in advanced economies. The moderate recovery is strengthening in the Euro Area; Japan is returning to positive growth; and activity remains robust in the US and the UK as well.
The not-so-good news is that emerging economies are likely to see their fifth consecutive year of declining rates of growth.
India remains a bright spot. China is slowing down as it rebalances away from export-led growth. Countries such as Russia and Brazil are facing serious economic difficulties. Growth in Latin American countries, in general, continues to slow sharply. We are also seeing weaker activity in low-income countries – which will be increasingly affected by the worsening external environment.
At the global level, there is still a drag on the economy because financial stability is not yet assured. Despite progress in recent years, financial sector weaknesses remain in many countries, and financial risks are now elevated in emerging markets.
If we put all this together, we see global growth that is disappointing and uneven. In addition, medium-term growth prospects have become weaker. The “new mediocre” of which I warned exactly a year ago – the risk of low growth for a long time – looms closer.
Why? Because potential growth is being held back by low productivity, population aging, and the legacies of the global financial crisis. High debt, low investment, and weak banks continue to burden some advanced economies, especially in Europe; and many emerging economies continue to face adjustments after their post-crisis credit and investment boom.”
I don;t have time for the time being to read her whole speech, but I bet that she did not waste a single word on the IMF’s unrealistic austerity policies that crash public services and infrastructures and pension funds and increase unemployment No, I am not talking about Greece :p
A further assumption of mine is that Lagarde and the whole IMF team have not realized yet that the global economy is still suffering form the recession launched in 2008.
In some countries austerity works, really (yes, I remember positive austerity stories). In some (yes, Greece) – it worked very badly, maybe there was too much austerity and too long time of austerity (1 year can be ok, but 5 or 6 years is exaggeration). And some problems are insolvable : “Because potential growth is being held back by low productivity, population aging, and the legacies of the global financial crisis.” Population aging is a problem in Europe and Japan, maybe also slowly it becomes a problem in China. Africa is the reverse, too much young poorly educated population. Probably parts of Middle East, too.
I am just suggesting that all of this is horribly complicated. And austerity is not always guilty.
“I am just suggesting that all of this is horribly complicated” – we finally agree on something 🙂
Angela Merkel will not be chancellor of Germany for much longer.
Merkel may not serve her full term, & could step down earily rather than to face defeat at the next election in October 2017.
It is being rumored that Angela Merkel will take over from Christine Lagarde at the IMF, as Lagarde’s 5 year term will be over in 2016.
Good Bye Christine … it was interesting
is this based on Australian press reporting?