Boosting the global economy
- By Christine Lagarde
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E-mail China Daily, January 7, 2014
While the worst fears have faded, the emerging economies face new policy challenges. In responding to slower demand, policymakers must be wary of financial excess, especially in the form of asset bubbles or rising debt. They should also focus on strengthening financial regulation, in order to manage credit cycles and capital flows more effectively, and on recreating fiscal room for maneuver.
Low-income countries, too, have been a bright spot for the global economy over the last five years. They proved resilient in the face of crisis, and many monetary policies - especially in Africa, where annual output rose by about 5 percent in 2013 - are enjoying strong growth. Now is the time to build on these gains, primarily by strengthening these countries' capacity to raise revenues. With demand from emerging markets weakening, low-income countries should bolster their defenses against a serious downturn, even as they continue to focus their spending on key social programs and infrastructure projects.
Middle East countries in transition face additional challenges in the form of social instability and political uncertainty. These problems should be addressed by laying the groundwork for dynamic and transparent economies, promoting more inclusive growth and ensuring continued support from the international community.
While challenges vary by country and region, many common problems must be addressed in the years ahead. Too many countries face a legacy of high public and private debt, fiscal and current account imbalances, and growth models that are unable to generate enough jobs. The international community also needs to complete the regulatory reforms required to create a safer financial system that better supports the needs of the real economy.
These are not abstract challenges. Only by addressing them can we ensure future prosperity at a time when billions of people have rising aspirations - to find jobs, to rise out of poverty and to one day join the global middle class.
In 2014, we need to take steps to help make this dream a reality. The IMF is committed to working with its 188 member economies to define and implement the policy measures that can power the engines of growth - and lift all people to renewed prosperity.
The author is managing director of the International Monetary Fund.
Project Syndicate
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