Lagarde Calls for New Recipe for Stronger Growth

Lagarde calls for policy upgrade to address weak growth

Better policy mix, attention to spillovers, and global cooperation key

IMF’s AIM is to help its members by being even more agile, integrated and member-focused

Addressing a news conference ahead of the 2015 IMF-World Bank Annual Meetings in Lima, Peru, Lagarde said that global policymakers will share experiences and discuss how to create a better policy mix for stronger, more durable, and inclusive growth.

Just as Peruvian cuisine has become a global success story by refining and updating traditional recipes, Lagarde said, global policymakers, too, needed to do the same.

“My key message to global policymakers: they need to upgrade their policy recipes to reinvigorate growth and reduce global uncertainty,” Lagarde said.

In this context, she presented the IMF’s Global Policy Agenda (see box), which outlines the challenges that policymakers face in a rapidly changing and uncertain global economy, the policy priorities for the IMF’s 188 members, and what the Fund can do to support its members. This agenda will be discussed during the Annual Meetings by the IMF’s policy-setting panel, the International Monetary and Financial Committee.

Growth prospects

The IMF released its world economic forecasts earlier this week, noting that global growth is expected to be weaker this year than last, at 3.1 percent, with only a modest acceleration to 3.6 percent in 2016.

“Such growth prospects are not enough to significantly reduce global unemployment and further reduce poverty levels,” Lagarde told news reporters.

In a speech last week in Washington DC, Lagarde noted that the outlook was affected by major economic transitions, including the prospect of rising U.S. interest rates, China’s slowdown, and the rapid drop in commodity prices. She stressed, however, that with the right policies, strong leadership, and global cooperation, it can be managed.

But I would not paint a dark picture, she said in response to a question. “I would simply insist on the policy mix that can be applied in order to move from an uneven and modest recovery, which has decelerated to something that is definitely stronger.”

Better recipe for growth

Lagarde highlighted three key ingredients for better growth.

First, manage the economic transitions. This involves a policy recipe that includes demand support, financial stability measures, structural reforms—and specific policy upgrades.

Second, watch for spillover effects. ...