Wednesday 21 February 2018

Rising growth could be cut down by 'sword of protectionism', IMF warns

Christine Lagard
Christine Lagard
Donal O'Donovan

Donal O'Donovan

A GLOBAL economic recovery is gaining momentum but could be cut down by the "sword of protectionism", International Monetary Fund (IMF) managing director Christine Lagarde said on Wednesday.

Speaking ahead of next week's IMF and World Bank spring meetings in Washington DC she said countries need to cooperate to solve trade issues such as reducing excessive external imbalances.

Her prepared remarks did not specifically mention US President Donald Trump's "America First" trade agenda, but she said restricting trade would be a "self-inflicted wound" that would disrupt supply chains and raise prices for components and consumer goods, hitting the poor hardest.

For the first time in years, she said the global economy "has a spring in its step" as the Fund prepares to release new growth estimates on April 18.

"The good news is that, after six years of disappointing growth, the world economy is gaining momentum as a cyclical recovery holds out the promise of more jobs, higher incomes and greater prosperity going forward," the former French Finance Minister said.

The head of the World Trade Organization (WTO) said global trade is expected to grow 2.4pc this year - up from 1.7pc in 2016.

The WTO warned that import taxes, such as that being considered by the US, will hurt

"If policymakers attempt to address job losses at home with severe restrictions on imports, trade cannot help boost growth and may even constitute a drag on the recovery," WTO Director-General Roberto Azevedo said in statement

The IMF said prospects are improving for advanced economies, where manufacturing activity is stronger, as well as for emerging and developing economies, which will contribute more than three quarters of global growth this year.

"At the same time, there are clear downside risks: political uncertainty, including in Europe, the sword of protectionism hanging over global trade, and tighter global financial conditions that could trigger disruptive capital outflows from emerging and developing economies," Ms Lagarde said. (Additional reporting Reuters / Bloomberg)

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