International Monetary Fund chief Christine Lagarde urged global policymakers on Thursday to support economic growth while also tackling financial risks stemming from the provision of easy money amid a "rapidly changing and uncertain world." Lagarde, presenting a Global Policy Agenda at the fund's annual meeting in Peru, said a recovery in the United States was broadly on track and an approaching rise in US interest rates would tighten global funding conditions.
But she added that the slowing of economic activity in China and recent market volatility were having larger-than-expected spillovers across the global economy. Policymakers could look to the cuisine of Peru for tips on how to draw on a variety of ingredients to update a traditional recipe, in this case for stronger growth.
"My key message to global policymakers is that they need to apply those recipes of Peruvian cuisine: look at the best practices around, and upgrade their policies in order to reinvigorate growth," she told a news conference. Emerging economies, which have contributed the bulk of world growth in recent years, have been hit hard by a slump in commodity prices.
The IMF cut its global growth forecast to 3.1 percent this year and 3.6 percent in 2016, the second downgrade this year even after central banks in major industrial economies have cut rates to near zero and spent around $7 trillion in quantitative easing programs in the seven years since the global financial crisis.
Despite these measures, investment, growth and productivity are stuck below pre-crisis levels and there is a lack of consumer demand. Lagarde acknowledged countries had not always listened to the IMF's call for a three-pronged approach of supporting demand, fostering financial stability and undertaking structural reforms - with a lot of work to be done still on reforms.