By Briahnna Brown
Despite decreasing its global economic growth forecast from 3.6 percent to 3.3. percent, the International Monetary Fund (IMF) is not worried about the global economy.
Christine Lagarde, the fund’s managing director, said during a George Talks Business event on Thursday that even though the momentum for global economic growth has slowed more than expected, the second half of 2019 is expected to be better than the first half, and there is no recession.
There are still geopolitical risks to growth, she added, such as the result of the Brexit decisions. The fund also is concerned about trade tensions between the United States and China and the effect those tensions are having on global economic growth, and trade has historically been a source of global economic growth.
"We are still worried about tensions on trade because if you combine all the tariff increases, all the threats, all the not-yet-ratified or in-the-making agreements, we still have a lot of uncertainty on the trade front," Ms. Lagarde said.
“It's critically important that trade tensions be eliminated rather than resulting to tariff increases and threats,” she continued, “and that there will be a clear understanding of where and how trade is going to develop in the future and continue to fuel growth.”
Ms. Lagarde also said the IMF anticipates that the trade tension would be resolved.
The discussion was held during the last George Talks Business event of the semester. Hosted by the George Washington University School of Business, the regularly scheduled series of moderated interviews features notable thought leaders in the business, government and nonprofit arenas.
GWSB professor Danny Leipziger, managing director of the Growth Dialogue, a think-tank focusing on sustainable economic growth, interviewed Ms. Lagarde in a packed Jack Morton Auditorium for the live-streamed event.
The driving force behind keeping the IMF relevant is a desire to be of service to the international community, Ms. Lagarde said. For her, relevance means studying gender inclusion and economics and staying up-to-date on financial technologies, as well as looking at the impact climate change will have on the global economy.
“It’s not just a question of taking very, very attentive care of the resources that we individually use at home and at work and all the time,” Ms. Lagarde said. “It's also a question about having the right policies in place."
She said globalization has had a positive impact domestically on reducing the cost of living, but a “detrimental” impact because of job losses. This is why nations need to remedy the negative domestic impact by retraining those who have lost their jobs and looking at how they are handling taxes and redistribution, which is both a fiscal and political task, she said.
There needs to be people-focused multilateralism that is also respectful to the sustainability of globalization for globalization to be able to impact people’s lives for the better, she said.
"I don't think there could be valuable globalization without strong multilateralism," Ms. Lagarde said. “For multilateralism to succeed, you need to be able to reconcile the fact that people can operate on a global basis, can benefit from globalization and feel like they have roots and know that they belong somewhere."
Ms. Lagarde also said that the world is seeing large inequalities between people with regard to income, wealth and access to opportunity. Making significant changes to resolve these three inequalities will be necessary for economic growth, she said.
"We have been saying for the last eight or nine years that excessive inequalities are not conducive to sustainable growth,” Ms. Lagarde said. “And it's going to need, in each of these three circumstances, a political choice made by the people in order to address what has now been identified as a risk to the capitalist system as we know it.”
