IMF predicts protracted subpar growth
McPherse Thompson, Assistant Editor - Business
WASHINGTON, DC: The global economy faces the prospect of prolonged subpar growth, accompanied by high unem-ployment and rising inequality, despite recovering from the Great Recession, the top official of the International Monetary Fund (IMF) affirmed on Wednesday.
"There is a very real risk that the world could get stuck for some time with a new mediocre level of growth," said IMF Managing Director Christine Lagarde.
She quoted the International Labour Organisation as saying that global unemployment currently stands at 200 million people, and rose by 30 million since the crisis began in 2008.
The average jobless rate in developed economies stands at 8.5 per cent, compared with 5.8 per cent before the crisis, she said, noting that in the developing world unemployment rose only slightly during the crisis and is now back to pre-crisis levels.
However, unemployment remains a key obstacle to tackling poverty and boosting growth, Lagarde said at a seminar, 'Challenges of job-rich and exclusive growth', staged as part of IMF's annual meetings on Wednesday.
As Lagarde and others have pointed out before, youth unemployment is a particular concern, now standing at 13 per cent or around 74 million globally. In the Middle East and North Africa, a third of young people and 46 per cent of young women cannot find work, she said.
The IMF chief said that while unemployment remained high, income inequality has also reached critical levels.
Oxfam, an international con-federation working worldwide to find solutions to poverty, recently estimated that the world's richest 85 individuals control as much wealth as the world's poorest 3.5 billion, said Lagarde.
According to the United States Federal Reserve, between 2010 and 2013 America's richest 10 per cent saw their incomes rise by 10 per cent, while the incomes of the poorest 20 per cent fell by eight per cent.
"This is a fairly stark picture," said the IMF chief, in outlining the scale and scope of the jobs and growth challenge.
The policy priorities for sustainable and inclusive growth require, firstly, fiscal policy, she said. Within budget constraints, governments can design more growth and jobs-friendly policies by, for example, exploring how it can redirect public resources towards activities that are more effective at promoting job-rich, inclusive growth.
The IMF has also been playing a role in the jobs and growth agenda, its advice increasingly mindful of the social impact of economic policies.
One indicator, she said, is that social spending floors were present in 29 out of 30 programmes supported under the IMF extended credit facility for developing countries. It is also a requirement under Jamaica's Extended Fund Facility with the IMF.
Noting also the need for public infrastructure investment, Lagarde said IMF analysis suggests that public capital stocks, as a share of gross domestic product, are currently 10 per cent below what they were in the 1980s for advanced economies, and 20 per cent below for developing economies.
"Infrastructure needs are clear, but we need to consider how to prioritise them, how to improve the quality and efficiency of investment, and how to square investment with high public debt and other spending priorities in many economies," she said.
The IMF predicted Tuesday that world output would grow more slowly than previously forecast. It predicts the global economy will grow 3.3 per cent this year, down one-tenth of a point below its forecast in July, but pick up to 3.8 per cent in 2015, which is two-tenths of a point below its previous estimate.