IMF’s Lagarde Predicts Global Growth In 2016 To Be Disappointing

January 1, 2016
IMF’s Lagarde Predicts Global Growth In 2016 To Be Disappointing August 21, 2018 Clive Nelson

Christine LagardeThe global economic outlook for 2016 is not very positive according to Christine Lagarde, the Managing Director of International Monetary Fund (IMF). Setting forth her views in a guest article in the German newspaper Handelsblatt, she recently predicted that growth in the forthcoming year would be disappointing and that the outlook for medium-term growth has deteriorated due to factors like reduced productivity, an aging population and the continual impact of the global financial crisis.

The forecast for 2016 released by the IMF earlier this year was that the world economy would grow by 3.6 percent. Lagarde states that the likely increase of interest rates in United States (U.S) and the expected slowdown of Chinese economy are contributing to feelings of uncertainty and heighted the risk of economic vulnerability across the world. Additional compounding factors include slowdown in global trade and decline in raw material prices which adversely affects economies that depend on it.

Apart from this, weak financial systems in many countries and rising financial risks in emerging markets are also contributing to volatility. In Lagarde’s view, while recent developments like normalisation of U.S monetary policy and China shifting to a consumption-led growth path were necessary and healthy, they must be accomplished as smoothly and efficiently as possible.

Interest rates were hiked by the U.S. Federal Reserve earlier this month after nearly a decade of near-zero rates. This is said to be the beginning of a gradual tightening in the US monetary policy. She has listed her concerns on the ripple effects arising from this significant development. Borrowing is already more expensive for borrowers like emerging and developing markets on the prospect of increased interest rates, and this is likely to continue.

With a strengthening dollar, market players with debt in dollars and earnings in local currencies might find it difficult to manage. Payment defaults could destabilise companies and consequently “infect” banks and states, although the risks could be managed by measures like demand creation, maintaining financial stability and initiating financial reform.

In the article, Christine Lagarde went on to say

Most highly developed economies except the USA and possibly Britain will continue to need loose monetary policy but all countries in this category should comprehensively factor spillover effects into their decision-making.

She has also put forward a number of suggestions to handle the coming changes in a smooth fashion. Some of the changes recommended by Lagarde include improved monitoring of the foreign exchange risks and budget restructuring.

About the Author

Clive Nelson

Clive Nelson Author

Hi, my name is Clive Nelson and welcome to Traders Bible. Just to tell you bit about myself…I have been trading FX and binary options for the best part of 10 years now. After graduating with honours in economics, I began working for an investment bank in New York as an assistant trader before working my way up. After a few years, I went on to work as a broker in London, England and then eventually came back to the U.S to work in a hedge fund, where I manage $800 million of my clients’ investments. There have been times over the course of my career where I’ve had to take a hit, but I’ve accepted that losing is part of the game, it’s a learning curve. I’ve learnt from my mistakes and you don’t have to make the same errors I did. A lot of my education came from when I was a broker and this is why I’m here to tell you that Traders’ Bible offers you the foundations of how to become a great trader.

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