Restoring solid, sustained and balanced growth is the central economic challenge facing the world today, said Christine Lagarde, the managing director of IMF (International Monetary Fund), emphasising the importance of well paced, country-specific credible fiscal adjustment combined with reforms aimed at increasing growth and jobs.
The IMF currently estimates global growth to be about 3.5% this year, while growth in advanced countries is expected to be much weaker at 1.5% in 2012, including a mild recession in the euro area, but emerging markets and developing countries are set to expand by 5.75%. However, there are 200 m people worldwide who cannot find work, including 75 m young people. “This is a potential disaster – in economic, social, and human terms,” Lagarde warned. Among the advanced economies, the ratio of debt to gross domestic product is forecast to reach 109% next year, the highest ratio since World War II. The head of the IMF further noted that the extremely loose monetary policy would normally lead to high demand growth. “But these are not normal times” she stated, adding “the mone-tary engine cannot do the job alone. In fact, growth is being held back by three ‘brakes’ in the system: fiscal adjustment, weak banks, and poor housing markets.” Lagarde called for greater economic cooperation across a range of areas – rebalan-cing the global economy, financial sector reform, and the global financial safety net.