The head of the International Monetary Fund said Thursday that risks to the global economic recovery have not been eliminated, and that policymakers must do more.
In a speech at the Brookings Institution in Washington, D.C., Christine Lagarde, managing director of the IMF, said that, despite recent improvements in the global economic outlook, more work is required to support the still fragile recovery. “We have seen some improvement in the economic climate. But let me also underline this point: the risks remain high; the situation fragile,” she said.
She called on policymakers to take this “opportunity to push on and take the further actions that are certainly needed to keep the crisis at bay and finally put it behind us.”
Lagarde said that policy actions in Europe and elsewhere have helped to reduce vulnerabilities, but, given the risks posed by sovereign and financial stresses, she said policymakers should build on those efforts, through strong country-level policies, support from the European Central Bank, repairing the banking system, and fiscal integration.
While Europe has been the focus, Lagarde also said that every country needs to be taking action to insulate themselves from these sorts of risks, including those not immediately affected by the crisis.
“The immediate focus of policies must therefore be to support growth where it is still weak,” she said, adding monetary policy can “support growth where inflation remains in check.” In terms of fiscal policy, she noted the imperative in many countries is “to restore sound public finances.”
She also urged policymakers to seize the moment to build a stronger long-term foundation for growth and stability, and she highlighted the importance of further action on financial sector reform; in restoring competitiveness; and in helping to build better functioning labour markets.
Additionally, Lagarde lobbied for a boost in IMF resources, as part of a strengthened global firewall.