IMF’s Lagarde Warns of Possible Extended Ordinary Global Economy

Policymakers scrambling to keep the world economy from settling into the “new mediocre” of sluggish growth can no longer rely on global trade to do the heavy lifting.  International trade helped the global economy tide over rough spots over two decades before the financial crisis, when it grew nearly twice as fast as economic output, but this engine is running out of fuel.

That is bad news for officials taking part in discussions at the International Monetary Fund and World Bank meetings this week, focused on preventing what International Monetary Fund chief Christine Lagarde warns could be a long spell of sub-par performance for the global economy.  The impetus from China and Russia opening their doors and the emergence of global supply chains, linking factories in emerging markets with rich consumers in the developed world, has largely run its course, economists say.

“It’s that particular engine which seems to have exhausted its propulsive energy for now,” said World Bank trade specialist Aaditya Mattoo.  The McKinsey Global Institute calculates trade and cross-border financial flows contribute up to a quarter of global growth, leaving policymakers with a gaping hole to fill if trade shifts into a lower gear.

Reuters

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