The global economy is strengthening but the International Monetary Fund warned on Wednesday that leaders of the Group of 20 must take action to deal with risks that remain a threat to growth.
Ahead of the G20 leaders summit this weekend in Hamburg, IMF Managing Director Christine Lagarde said the mood is upbeat given the now one-year-old recovery.
However, “it should be cautious optimism that prevails-policy efforts are still needed to strengthen the recovery and build more inclusive economies,” Lagarde said in a blog post.
In her comments on the report the IMF prepared for the G20, Lagarde urged action to address issues such as high corporate debt in emerging market economies, especially China, low productivity growth, and US policy uncertainty.
“Left alone, this constellation of concerns could be a recipe for sudden financial distress, when the world’s economies also continue to struggle with several longer-term problems,” she said.
Adding to concerns about aging populations and growing economic inequality, these “challenges put a ceiling on potential growth, making it harder to raise incomes and living standards.”
The IMF “Surveillance Note” said while the risks to the global economy in the short term are more balanced, “downside risks still dominate in the medium term.”
“There is no time for standing still,” the IMF said. “Policymakers will have to take tangible policy action to strengthen and sustain the recovery while ensuring that it is resilient, well-balanced, and more inclusive.”
