"Without action, we could see the global economic supertanker continuing to be stuck in the shallow waters of sub-par growth and meager job creation," Lagarde said in a blog on the IMF website. The G20 industrialised countries, which account for more than 80 percent of the global economy, tasked the IMF to monitor the implementation of its growth strategy. Turkey took over the rotating G20 presidency in December.
According to Lagarde, the G20 finance chiefs meeting on Monday and Tuesday should work urgently on structural reforms in the midst of global risks ranging from divergent central bank policies, with the US Federal Reserve on a tightening path while others are increasing stimulus; a stronger dollar; and weak growth and inflation in the eurozone and Japan. "We need a decisive push for structural reforms in areas such as trade, education, health, social safety nets, and labour and product markets, as well as efficient infrastructure," she said.
Though the global economy may get a further lift from falling oil prices and relatively stronger US growth, Lagarde said, the Fed's ongoing exit of exceptional support for the US recovery, even if well-managed, could result in "excessive volatility" in financial markets. Lagarde said the strengthening dollar poses a special risk for emerging-market economies where banks and companies have increased their borrowing in the greenback over the past five years.
And a further risk to the global economy was the possibility that the eurozone and Japan "could remain trapped in a twilight zone of low growth and low inflation for a prolonged period. "These 'low-low conditions' would raise the risk of recession and deflation, because they would make it even harder for many countries to reduce high unemployment and high debt," Lagarde said.