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Asia Today ISSN 1861-4604 Thursday, October 18, 2018

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IMF chief call for collaboration to make growth more inclusive

Lagarde told an audience of college students

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WASHINGTON - International Monetary Fund Managing Director Christine Lagarde Thursday called for international collaboration for making growth more sustainable and more inclusive by reforming the international monetary system to better integrate fast-growing emerging markets .

Speaking ahead of this week's World Bank-IMF spring meetings in Washington, D.C., Lagarde told an audience of college students and delegates at George Washington University that lifting today's growth is not enough.

"We also need to lift the rate at which economies can grow over the medium term. Potential growth rates are going down, and this is in part because of changing demographics, lower productivity and, in some countries, the legacy of the crisis," Lagarde stated.

Reversing this trend means making serious structural reforms that encompass labor and product markets, infrastructure, trade, and investments in people.

Implementing these reforms will call for strong leadership, Lagarde said.

The IMF chief stressed that international collaboration is also essential for making growth more sustainable and more inclusive.

"We need to continue reforming the international monetary system to make it more resilient, including efforts to better integrate fast-growing emerging markets," Lagarde stated.

2015 would be a special year for development when global attention is focused on three critical issues: financing for development, the new Sustainable Development Goals, and climate change, Lagarde underlined.

Lifting today's growth, fortifying tomorrow's prospects, and working together for the future are the collective goals targeted by the Global Policy Agenda that will be presented to senior officials by Lagarde at the 2015 Spring Meetings.

Lagarde noted that the IMF's updated forecasts project the global economy to grow this year at 3.5 percentabout the same rate as last yearand to grow slightly faster at 3.8 percent next year.

"So the good news is that the global recovery continues. The not-so-good news is that growth remains moderate and uneven," Lagarde told reporters at a press conference.

Participants at the Spring Meetings would be discussing how to prevent this "new mediocre" becoming the "new reality," she stated.

The decline in prices of commodities, such as oil, copper and iron ore, are some of the challenges that are expected to hurt growth in some developing economies, such as China and Brazil.

However, the decline in oil prices is overall expected to deliver "a net positive on an aggregate global basis" with "more winners in aggregate than losers," Lagarde said.

Oil exporting countries will take a financial hit, while oil importing countries will see an economic boost from the price decline, she said. Countries that pay fuel subsidies should take the opportunity to remove those subsidies and spend the money elsewhere, she said.

Lagarde also cited the strong dollar and innovation in information technology, on the West Coast of the United States and by young entrepreneurs in China, as positives for the global economy.

She dismissed the notion that a move by the Federal Reserve to raise interest rates, as the Fed has signaled it is considering, would upset world markets.

"I don't know when it will be done, but (Federal Reserve Chair Janet Yellen) is going to very attentive, very careful," Lagarde said. "It's not going to come as a surprise. It will create some disruption," but not in the way that the Fed's tapering of its bond-buying programme did in May 2013.

Lagarde said indicated that the multilateral funding body will support the creation of the Asia Infrastructure Investment Bank if the institution commits to financing vital needs that will push growth and aid the financial well-being of its members,. More than 50 countries have rallied to the bank.

Former Treasury secretary Larry Summers, in an opinion piece published in The Washington Post earlier this month, had expressed apprehension that the creation of the new banking consortium led by China may spell the demise of the United States as the underwriter of the global economic system through organizations such as the World Bank and the IMF.

"I try never to agree with Larry, although he is often right," Lagarde said.

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