Let’s celebrate growth but not forget risks facing global economy: Christine Lagarde

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IMF chief Christine Lagarde said the global economy is in a sweet spot with all major economies doing well, though risks remain in the form of US tax rate cuts, growing inequality and lack of international cooperation.

“All major developed and developing economies are doing well and let’s celebrate that. There may be some policies that may be debated in some parts of the world, but in the end, they seem to have worked for now for growth,” Lagarde said.

Speaking at a session on the global economic outlook on the last day of the World Economic Forum (WEF) annual meeting, she said what could go wrong would include the risks that emanate from the US tax rate reforms and excessive inequalities that are growing in many areas.

Other risks include lack of global cooperation and the resulting geopolitical fractions, she added.

“The global economy is in a sweet spot with around 120 countries set to see strong growth in 2018. Confidence is due to a cyclical upswing and mostly good monetary and fiscal policies,” the IMF managing director said.

The WEF, which began on Monday, has seen several leaders flagging concerns like excessive inequality and the risks facing the globalisation process.

Lagarde also listed financial risks as among the key risk factors to her positive outlook for the global economy.

Speaking in the same session, Bank of England Governor Mark Carney said the global recovery is getting stronger and broader, with wages firming and economies moving to full employment.

Carney denied that central bank policies are creating a dangerous bubble in asset prices.

In reply to a question, he said the risk of another asset crash is quite low and the banking system has the liquidity to cope with shocks.

He said more investment relative to savings is leading to monetary normalisation and for central banks, there is a regime shift towards normalisation.

“In a pre-crisis world, the coverage of short-term liability for central banks was 10 percent and now it is 110 percent,” he added.

Bank of Japan Governor Haruhiko Kuroda said Japanese economy is expanding and the jobless rate is very low, in what he described as the second biggest boom for the country in the post World War II era.

Referring to Lagarde’s comment at the WEF earlier this week that the roofs should be fixed while the sun shines, Hong Kong SAR government Chief Executive Carrie Lam said she has not found any leaking roof.

She said Hong Kong is benefiting from global recovery and would see a good growth.

Responding to a question on US President Donald Trump’s indirect comments earlier in the day on China’s trade policies, Lam said trade wars pose big risks.

She also said China is still a developing economy and its trade with the rest of the world will become more equitable over time.

Explaining her cautionary remark that reforms should be best done in times of growth, Lagarde said there are multiple roofs across the world that need to be fixed.moneycontrol