IMF leader Christine Lagarde praises China’s economic stimulus but warns on debt-heavy belt and road loans
- High on Lagarde’s list of self-inflicted economic wounds is the US-China trade war and its hundred of billions of dollars in tariffs
- Concern that some Asian, African and Latin American borrowers may not be able to repay Beijing, leaving them politically and economically vulnerable
Lower global debt levels, more disciplined tax policy and an end to trade battles that result in “self-inflicted wounds” are needed to shore up the global economy at a delicate juncture, the head of the International Monetary Fund warned on Thursday, while adding that China’s recent stimulus moves are welcome as long as excessive debt-fuelled investment is avoided.
Christine Lagarde, the IMF’s managing director, said global leaders should address looming problems before the next downturn, and drew a parallel with global warming.
“Just like nature, the global economy is also currently quite uncertain,” she said in Washington at the spring meetings of the IMF and World Bank. “We certainly would recommend two key principles. One is do no harm. Second is do the right thing.”
Those recommended measures include addressing distortions in the global trading system, reforming the Geneva-based World Trade Organisation, resolving uncertainty over Brexit and having nations adopt stronger financial policies. High on the list of “self-inflicted wounds” is the China-US trade war, which has seen hundreds of billions of dollars’ worth of tariffs slapped on manufactured goods, unsettling global markets and adding to the uncertainty.
On Tuesday, the IMF slashed its 2019 global growth forecast to 3.3 per cent from 3.6 per cent in 2018 even as it boosted its outlook for China’s annual growth to 6.3 per cent, up 0.1 percentage point from its last forecast. Beijing’s recent stimulus moves and a better outlook for a US-China trade deal spurred the change.