The Path Forward: A Talk with Tharman Shanmugaratnam

Positive and constructive discussions; solve problem through cooperation

Advanced and emerging economies face similar policy challenges

Refocus on medium-term fiscal plans; structural reforms

In an interview, Tharman Shanmugaratnam—Deputy Prime Minister of Singapore and Chair of the IMF’s policy steering committee, the IMFC—lays out a policy path for all countries for higher growth, incomes, and jobs. He also sees the eventual normalization of monetary policy in advanced economies as a net positive for emerging markets.

IMF Survey: The IMF’s policy steering body met today amid a subdued and uneven growth outlook. Can you give us a sense of the discussions?

Tharman: If you look at the discussions over the last few days, both at our restricted closed-door sessions, as well as the formal plenary, I would say the mood has been consistently positive and constructive. By that I don’t mean that people were trying to talk away the problems, but that everyone acknowledged that there are problems that can be solved, and there were some things that we could do to cooperate with each other so that we arrive at global solutions to some global problems. So it was a mood of collegiality, much more so than we have seen in a while.

IMF Survey: We heard a lot on the emerging markets at these meetings, with many transitioning to a slower growth pattern. What message should emerging markets be taking away?

Tharman: I think the emerging markets are, first, taking some cyclical knocks. They were growing extremely rapidly in the last few years, some above potential. There is a reversion back to potential. For some of them it is also a matter of moving to a new structural setting, not just taking a cyclical knock, because the demographics are changing.

China is the most important example of this. The labor force is slowing down. They are reaching a new phase of development, and they are resetting the path of growth. Now, that is a positive. It looks like lower growth rates but it is actually a positive because it is about sustaining growth and not overheating the economy and then facing a major correction further down the road.

Several other economies are in the same situation. They are resetting their structural path of growth, moving onto a new footing. For instance, by productivity increases, skill improvements, and innovation. So by and large, changes in...