Publication -
The Managing Director’s Global Policy Agenda: A More Inclusive and Resilient Global Economy April 2017
The Managing Director’s Global Policy Agenda A More Inclusive and Resilient Global Economy April 2017
The global economy is gaining momentum, but further progress hinges on policies to support the recovery, lift productivity growth, and enhance resilience. Against the background of rapid technological progress, a cooperative multilateral framework for trade and financial integration has served countries well, producing large economic benefits.
However, some groups have not been able to share in these benefits, a trend exposed by a too-slow post-crisis recovery, which limited the room for all segments of society to experience income gains. Working within the multilateral framework, countries should strive for strong and more balanced growth and to provide economic opportunities for all. To this end, they should anticipate the effects of technological progress and economic integration, equip their populations with tools to reap the benefits, and put in place domestic policies to share them more broadly. The Fund will assist members through carefully tailored policy advice, lending to smooth adjustment, and capacity development.
Global growth is strengthening, but sustaining the momentum requires supportive policies
Near-term growth prospects are firming up in many advanced economies, with some near full employment. Still, a number of advanced economies are operating below potential, with economic activity weighed down by debt overhangs, weak banking systems, and uncertainty over future growth. Although growth prospects diverge across emerging market and developing countries (EMDCs), overall growth is picking up, as some large economies continue to normalize supported by domestic policies, fast credit growth, and the recent recovery in oil prices. The improved near-term global outlook is, however, predicated on growth-supporting policies—e.g., a favorable mix for macroeconomic policies and taming of vulnerabilities in systemic economies—and on an undisrupted flow of global trade and finance. It is also subject to risks from political uncertainty and tighter global financial conditions triggering capital outflows from EMDCs
Productivity growth has not yet recovered, and vulnerabilities remain high, continuing to cloud medium-term growth prospects
The productivity slowdown predates the crisis, but crisis legacies—including weak and uncertain economic prospects and sluggish private investment—have further held back productivity growth, especially in advanced economies. With growth too low for too long, enduring demographic challenges, such as aging in many advanced and emerging market economies have become more difficult to address. Vulnerabilities also persist from large external and public debt, impaired corporate and bank balance sheets, and, in some EMDCs, overheated credit and property markets. These vulnerabilities expose countries with thin policy buffers to tighter financial conditions. Notwithstanding the recent recovery, low commodity prices continue to weigh on many commodity exporters
Trade and financial integration brought enormous benefits, but some groups are missing out on the rewards
By allowing more efficient use of global resources, trade and financial integration and technology lifted hundreds of millions out of poverty, boosted incomes, expanded access to goods and services, accelerated knowledge transfer, and provided new opportunities for investment. However, a too-slow post-crisis recovery, which limited the room for all segments of society to experience income gains, exposed the long-running difficulties of some groups in advanced economies to be able to adjust to the rapid pace of technological progress and integration. While returns to capital and highly-skilled labor increased, wages of low- and middle-skilled workers stagnated. The ensuing increase in inequality and anxieties about integration’s effects on other aspects of life led to questions about its benefits. Some EMDCs may soon start facing similar challenges as jobs there become threatened by automation and offshoring.
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