IMF Calls National Trade Barriers ‘Economic Malpractice’
Wednesday, International Monetary Fund (IMF) Managing Director Christine Lagarde said the institution would lower its Y 2016 US growth forecast again and called policies that restrict trade “economic malpractice” that would inhibit growth.
Ms. Lagarde, in prepared remarks at Northwestern University ahead of next week’s IMF and World Bank (WB) annual meetings, said the US growth forecast would be reduced again because of economic setbacks in 1-H of this year.
The IMF in July had cut its Y 2016 US growth forecast to 2.2 from 2.4% based on weak Q-1 growth. The Fund will issue new forecasts next week in an update to its World Economic Outlook.
Japan and Europe were seeing sub-par growth, but the picture did not appear to be deteriorating, Ms. Lagarde said.
She said China and India would continue to do relatively better, growing at around 6% and more than 7%, respectively, while recession-wracked Brazil and Russia were starting to show some signs of improvement.
“Adding it all up, the good and the bad, we continue to face the problem of global growth being too low for too long, benefiting too few,” Ms. Lagarde said.
Taking a swipe at GOP presidential nominee Donald Trump, she strengthened her warnings on the dangers of erecting more trade barriers, calling this “a clear case of economic malpractice” that would deny economic opportunities to many workers, hurt global supply chains and raise costs of many basic goods.
“If we were to turn our backs on trade now, we would be choking off a key driver of growth at a point when the global economy is still in need of every good piece of news it can get,” Ms. Lagarde said.
Governments should pursue instead more and better policies to retrain workers displaced by trade and automation, invest more in education and infrastructure and pursue efficiency reforms to help drive growth in their economies, she said.