IMF urges Argentina to step up pace of economic reforms

  Please use the sharing tools found via the email icon at the top of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email licensing@ft.com to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found at https://www.ft.com/tour. https://www.ft.com/content/4cb6ab44-adb0-11e4-97c1-00144feab7de   The world’s leading economies must do more to boost growth and to step up the pace of structural reform and investment, the head of the International Monetary Fund said on Friday, as she warned that the global economy was at risk of being stuck in its post-crisis doldrums.   The global economy was at risk of being stuck in its post-crisis doldrums, Christine Lagarde, IMF managing director, wrote in a blog post. “Without action, we could see the global economic supertanker continuing to be stuck in the shallow waters of subpar growth and meagre job creation.”   The call for greater action comes ahead of a meeting of Group of 20 finance ministers due to begin on Monday in Istanbul. Concerns about slow global growth and the risk of a resumption of the euro crisis over Greece and its new government’s insistence on debt relief will take centre stage at the talks.   G20 leaders committed in November to a “growth agenda” that Ms Lagarde said would add $2tn to the global economy if implemented.   But since that pledge the IMF has downgraded its growth forecasts for this year to 3.5 per cent and warned downside risks remained.   Ms Lagarde cautioned again of what she called the “asynchronous monetary policy” in the world with the US Federal Reserve “normalising” its policy while many others, including the European Central Bank, were increasing monetary stimulus.   “Even if this process is well managed, it may result in excessive volatility in financial markets as investors reassess their perception of risk,” Ms Lagarde wrote.   The strengthening of the US dollar, based in part on the expectation that the Fed would move this year to increase interest rates for the first time since the 2008 global financial crisis, also posed a risk, she said. That applied particularly to emerging market economies, which were “especially vulnerable because, over the past five years, many of their banks and companies have increased their borrowing in dollars”.   In depth Oil: the big drop   Latest news and comment on the global economic and political consequences of tumbling oil prices   Further reading The former French finance minister also warned that the eurozone and Japan risked remaining trapped in a “twilight zone of low growth and low inflation for a prolonged period”, something that increased the risk of recession and deflation.   “This all points to the need for a more powerful policy mix” and the need for increased structural reforms that would eventually encourage growth and more investment, particularly in infrastructure, Ms Lagarde said.   In a separate briefing note prepared for the G20 ministers, IMF economists said that while the fall in oil prices would boost the global economy it would be “more than offset” by a drag on investment caused by concerns about the world’s medium-term growth prospects.   They also repeated a December warning that the fall in oil prices had heightened risks to global financial stability. This was particularly the case in many of the same emerging economies where the rise in the dollar already presented a risk because of the high levels of dollar-denominated debt mentioned by Ms Lagarde.   “If sustained, the decline in oil prices could have a material impact on banks with high dollar and energy sector exposures, particularly in emerging economies where [currency] depreciations have already been substantial,” the economists wrote. “Given global financial linkages, these developments demand increased vigilance all around.”

source: AFP