Cheap oil won’t help recovery, warns IMF chief Christine Lagarde
Cheap oil is unlikely to speed up recovery, International Monetary Fund (IMF) chief Christine Lagarde has warned, adding that global recovery is currently too "lopsided".
In a speech to the Council on Foreign Relations in Washington, Lagarde suggested that although growth in the US and a lower oil price has given economies a helping hand, the world is facing a "very strong headwind". "A shot in the arm [from cheap oil] is good, but if the global economy is weak on its knees, it's not going to help," she said.
Lagarde cautioned against being "more upbeat" about the prospects for the global economy.
Too many countries are still weighed down by the legacies of the financial crisis, including high debt and high unemployment. Too many companies and households keep cutting back on investment and consumption today because they are concerned about low growth in the future.
The cause? "Lacklustre investment", she said.
And in the week the World Bank slashed its forecast for global economic growth Lagarde echoed its warning that the US alone cannot drive global recovery – and that if the US Fed chooses to raise rates too soon, it could "risk harm to world financial stability".
The oil price and US growth are not a cure for deep-seated weakness elsewhere.
But citing the landing of the spacecraft Rosetta on a comet late last year, she added that the global economy was likely to experience three "Rosetta moments" in 2015 – three major policy challenges that will require courageous political decision making.
The first will be the challenge of injecting new momentum into the recovery, the second will be generating "more inclusive growth", and the third will be "engendering more sustainable growth".
There are no secrets about what can engender growth. But if they are to deliver on the three Rosetta moments, they need to enhance global cooperation. They need to embrace what I have called the “new multilateralism”. This is the year when it should be put into practice.