In my meetings with G-20 Leaders over the past two days, I emphasized that global growth remains strong, but that it is moderating and becoming more uneven.
Pressures on emerging markets have been rising and trade tensions have begun to have a negative impact, increasing downside risks. Choosing the right policy is therefore critical for individual economies, the global economy, and for people everywhere.
The choice is especially stark regarding trade. We estimate that, if recently raised and threatened tariffs were to remain in place and announced tariffs were implemented, about three-quarters of a percent of global GDP could be lost by 2020.
If, instead, trade restrictions in services were reduced by 15 percent, global GDP could be higher by one-half of a percent. The choice is clear: there is an urgent need to de-escalate trade tensions, reverse recent tariff increases, and modernize the rules-based multilateral trade system.
Another urgent issue is the excessive level of global debt—about $182 trillion by the IMF’s estimate. It is important, particularly for highly indebted emerging-market and low-income countries, to rebuild buffers and reverse procyclical fiscal policies.
Increasing debt transparency, such as on the volumes and terms of loans, by borrowers as well as lenders, is as important as supporting debt sustainability.
To meet the challenges facing the global economy, I made the following policy recommendations to the G-20:
First, fix trade—this is priority No. 1 to boost growth and jobs.
Second, continue to normalize monetary policy in a well-communicated, gradual, data-driven manner—and with due regard to potential spillover effects.
Third, address financial risks, using micro- and macro-prudential tools to tackle problems related to leveraged lending, deteriorating credit quality, and high exposure to foreign currency or foreign-owned debt.
Fourth, use exchange rate flexibility to mitigate external pressures, avoiding tariffs and other policies that could weaken market confidence.
Finally, eliminate legal obstacles to the participation of women in the economy. This is key to tackling high and persistent inequality, and would add to the growth potential of all G-20 countries.
I am also encouraged by the G-20’s continued commitment to strengthen the global financial safety net, with a strong and adequately financed IMF at its center. It is important that the G-20 Leaders have pledged to conclude the 15th General Review of Quotas by our Spring Meetings, and no later than the Annual Meetings in 2019.
I would like to warmly congratulate President Macri and the Argentine authorities and team on their very effective leadership of the G-20 and on hosting the Leaders’ Summit in the wonderful city of Buenos Aires.
I also commend the authorities for their resolve in implementing their economic reform plan, which will pave the way for more inclusive and sustainable growth to benefit all Argentines. The IMF will continue to support the authorities in their endeavor.
Editor’s note: Speech by Managing Director of the International Monetary Fund (IMF), at the conclusion of the Group of 20 (G-20) Summit in Buenos Aires, Argentina: