Christine Lagarde says Trump is hurting global economic stability …As IMF predicts less than 6% growth for China’s economy in 2020
Former head of the International Monetary Fund IMF, Christine Lagarde, has said that the US President Donald Trump is responsible for many of the risks facing the global economy, and warns that the rise of nationalism is not the answer to economic fears.
Meanwhile in a related development, the IMF has predicted that China’s economic growth could moderate further in 2020, even though the global economy is likely to pick up pace.
In an interview aired Sunday night on CBS’s “60 Minutes,” Lagarde, who was confirmed last week as the next president of the European Central Bank — said Trump’s unpredictability, has forced investors to stop taking risks and that the U.S.-China trade war is “going to give a big haircut to the global economy.”
“If you shave off, you know, almost a percentage point of growth that means less investment, less jobs, more unemployment, reduced growth. So of course it has an impact,” she told CBS News’s John Dickerson. Lagarde urged policymakers to “please sit down like big men” and make a deal.
Lagarde said that if Brexit finally goes through, the ripple effects will touch not just Britain and the EU, but the U.S. as well, because of the connected global economy.
That same interconnectedness makes nationalism — a concept that Trump has touted — self-defeating, she said.
“What can walls do about pandemics?” she asked. “What can walls do about terrorism? What can walls do about climate change and destruction of the environment? This is not the answer to the global questions and issues that interconnect, whether we like it or not.”
Lagarde added that for the economy of the future to thrive, women must have a central role. Women assess risk better, she said, and more women should be in executive roles.
“Poverty is sexist and we have to remember that and make sure that women are not forgotten,” she said.
The IMF had in its World Economic Outlook report, said the Chinese economy could grow at 5.8per cent next year — slower than the 6.1% forecast for 2019. China grew 6.6 per cent last year, according to the IMF.
“The Chinese economy is slowing down, which has continued an earlier trend of slowing down, which started a couple of years ago,” Tao Zhang, IMF’s deputy managing director, told CNBC’s Geoff Cutmore at the World Bank-IMF Annual Meetings in Washington on Saturday.
“In recent years, what’s going on in the world — we have trade tensions, we have other geopolitical forces, we have all these uncertainties around the world; these add further downside pressures to the Chinese economy,” he added.
Still, Zhang said such growth rates are “reasonable” given that China is restructuring its economy to expand in a more sustainable way. That means relying less on debt to fuel growth, while focusing more on domestic consumption.
Such a transition would translate to slower but better quality growth in China, according to Zhang.
On Friday, China said its economy grew by 6 per cent in the third quarter, the slowest since the first quarter of 1992, according to Reuters.
“You won’t expect any of the economies, whatever the size, to grow continuously at 10per cent or seven per cent or eight per cent … So, I think, we are talking about growth with better quality, higher sustainability,” he said. “5.8 per cent or any number in that neighborhood, I think is reasonable.”
On the ‘precarious’ global outlook, China’s projected slowdown next year contrasts with the IMF’s forecast for a recovery in the global economy.
The fund said world economic growth is forecast to rebound to 3.4 per cent in 2020, after an anticipated slowdown to 3% this year from 3.6 per cent last year due partly to uncertainties caused by the U.S.-China trade war.
But the fund said the outlook remained “precarious.”
“We said that projection is precarious because a lot has to depend on what’s going on with policy uncertainty reductions — and there’s a huge uncertainty to that,” said Zhang