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IMF chief optimistic on growth, but warns against trade protectionism

Reuters  |  HONG KONG 

HONG KONG (Reuters) - The (IMF) is optimistic on the outlook for global growth but warned darker clouds are looming due to fading fiscal stimulus and rising interest rates, the fund's Managing Director, Christine Lagarde, said on Wednesday.

In a speech in Hong Kong, said the top priorities for the global are to steer clear of protectionism, against financial risk and foster long-term growth.

The IMF was speaking as a trade conflict between the and is creating significant uncertainty for businesses and their global supply chains.

"History shows that import restrictions hurt everyone, especially poorer consumers," said.

"Not only do they lead to more expensive products and more limited choices, but they also prevent trade from playing its essential role in boosting productivity and spreading new technologies."

The best way to is to use or structural reforms, she said, adding that the World Trade Organization's rules were in danger of being "torn apart", which would be "an inexcusable, collective policy failure."

Policymakers need to commit to a level playing field and resolve disputes without using exceptional measures, she said.

"There are threats, there are counter-threats, there is an attempt to open a dialogue - we should support that dialogue attempt as much as we can," said. "The impact of those threats is minimal on both sides. What is not minimal is the way in which confidence can be undermined."

The reality for 2018 and 2019 was that momentum would eventually slow due to fading fiscal stimulus, rising interest rates and tighter financial conditions, said.

New analysis by the IMF showed that global debt had reached an all-time high of $164 trillion, 40 percent higher than in 2007, with accounting for just over half of that increase.

said economies needed to reduce government deficits, strengthen fiscal frameworks and place public debt on a gradual downward path.

"Strengthening financial stability by increasing buffers in corporate and sectors is key, especially in large emerging markets such as and India," she added.

Housing markets in major cities worldwide were increasingly moving in tandem, with warning that could amplify any financial and macroeconomic shocks coming from any one country.

Asked about the IMF's view on the Hong Kong dollar's peg to the U.S. dollar, said the fund believed the pegging mechanism is consistent with the fundamentals of the financial hub's

The Hong Kong dollar was pegged to the greenback in 1983. The peg has forced the former British colony to import ultra-loose monetary policy from the U.S in recent years, with rock bottom interest rates in Hong Kong having helped to fuel soaring

The IMF was speaking after attending the Boao Forum in where she said that a global economic recovery was taking root.

(Reporting by and Venus Wu; Editing by and Sam Holmes)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, April 11 2018. 13:02 IST