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IMF/LAGARDE
STORY: IMF/ LAGARDE
TRT: 1:40
SOURCE: IMF
RESTRICTIONS: NONE
LANGUAGE: ENGLISH/NATS
DATELINE: 2 OCTOBER 2014, WASHINGTON DC
1.Wide shot, Lagarde walks on stage
2.Wide shot, Lagarde speaking
3.SOUNDBITE (English) Christine Lagarde, Managing Director, IMF:
“There has to be a new momentum. The new momentum that will consist of putting a set of bold policies together in order to overcome what I would call the new mediocre. That’s a risk, if it stagnates as such, if we have this horizon of new mediocre.”
4.Cutaway, audience
5.SOUNDBITE (English) Christine Lagarde, Managing Director, IMF:
“There is a concern that financial sector excesses may be building up, especially in advanced economies. Asset valuations are at their highest; spreads and volatility in almost all sectors, not quite all, but almost, are at their lowest. A further worry is the migration of new market and liquidity risks outside the banking sector, in what we call the ‘shadow banking sector.’”
6.Cutaway, audience
7.SOUNDBITE (English) Christine Lagarde, Managing Director, IMF:
“The development of the Ebola virus, if it is not contained, if all the players that talk about it, don’t actually do something about it to try to stop it, contain it, and help those three countries deal with it, it might develop into something that would be a very serious concern and could cause significant risks.”
8. Wide shot, crowd
9. SOUNDBITE (English) Christine Lagarde, Managing Director, IMF:
“When policymakers get together to sort out the financial sector, to regulate it better, to supervise it better, they have to cooperate. They have to operate on a multilateral basis. When they discuss monetary policy and revisit monetary policy, they have to cooperate because they have to be mindful of not only the effect at home, but the spillover effects abroad and how it spills back at home again.”
10.Cutaway, audience
11.SOUNDBITE (English) Christine Lagarde, Managing Director, IMF:
“Excessive inequality is bad for sustainable growth. It is not conducive to sustainable growth. So if we want sustainable growth, which is the aim of all G20 leaders when they get together, then excessive inequality has to be the target, or one of the targets.”
12. Wide shot, crowd applauding
In a Washington speech heralding next week’s IMF-World Bank Annual Meetings, IMF Managing Director Christine Lagarde said the IMF’s main job now is to help the global economy shift gears and overcome a brittle and uneven recovery that is beset by risks.
She told an audience at the Georgetown University School of Foreign Service October 2 that the world economy is at an inflection point. The world needs to aim higher and try harder, Lagarde stated.
“There has to be a new momentum. The new momentum that will consist of putting a set of bold policies together in order to overcome what I would call the new mediocre. That’s a risk, if it stagnates as such, if we have this horizon of new mediocre,” Lagarde said.
The Annual Meetings of the IMF and the World Bank Group each year bring together around 10,000 central bankers, ministers of finance and development, private sector executives, and academics to discuss issues of global concern, including the world economic outlook, poverty eradication, economic development, and aid effectiveness.
Six years after the financial crisis began, there is continued weakness in the global economy, and only a modest pickup is foreseen for 2015, Lagarde observed. Among advanced economies, the rebound is expected to be strongest in the United States; modest in Japan; and weakest in the euro area.
Led by Asia, and China in particular, emerging market and developing economies are expected to continue to help drive global activity. For them too, however, it is likely to be at a slower pace than before.
For the low-income developing countries, including sub-Saharan Africa, economic prospects are rising but, as debt builds up in some countries, they need to be watching as well. In the Middle East, the outlook is clouded by difficult economic transitions and by intense social and political strife.
The world economy risks getting stuck with a mediocre level of growth—low growth for a long time, Lagarde said.
Lagarde also pointed to concern that financial sector excesses may be building up, especially in advanced economies. Asset valuations are at an all time high; spreads and volatility are at an all time low.
Also worrying is the migration of new market and liquidity risks to the “shadows” of the financial world—part of the less-regulated, nonbank sector, which is growing rapidly in some countries.
“There is a concern that financial sector excesses may be building up, especially in advanced economies. Asset valuations are at their highest; spreads and volatility in almost all sectors, not quite all, but almost, are at their lowest. A further worry is the migration of new market and liquidity risks outside the banking sector, in what we call the ‘shadow banking sector,’” Lagarde said.
In addition developments in Ukraine, the Middle East, and in countries affected by the Ebola outbreak represent geopolitical risk.
“The development of the Ebola virus, if it is not contained, if all the players that talk about it, don’t actually do something about it to try to stop it, contain it, and help those three countries deal with it, it might develop into something that would be a very serious concern and could cause significant risks,” Lagarde said.
Faced with these events, the world economy can muddle along with sub-par, mediocre growth, Lagarde said.
A more balanced policy toolkit would use both the demand and supply side of the economy. Monetary policy has provided important support to demand during the crisis, Lagarde observed.
Now it needs more support from other policies, specifically growth- and job-friendly fiscal policies, such as addressing tax evasion, supporting more efficient public spending, and cutting payroll taxes; structural reforms to raise productivity, competitiveness, and employment through training programs; encouraging women to join the labor force; opening up product and service markets; and reforming energy subsidies; and boosting efficient public investment in infrastructure, which can be a powerful impetus for growth and jobs.
But given “mediocre” growth and the policy “momentum” needed to overcome it, galvanizing global cooperation in such an effort involves multilateralism and the role of the IMF, Lagarde said.
“When policymakers get together to sort out the financial sector, to regulate it better, to supervise it better, they have to cooperate. They have to operate on a multilateral basis. When they discuss monetary policy and revisit monetary policy, they have to cooperate because they have to be mindful of not only the effect at home, but the spillover effects abroad and how it spills back at home again,” Lagarde said.
Noting that 2014 marks the IMF’s 70th anniversary, Lagarde said the IMF had been a forum for cooperation throughout its history, including through the financial crisis. She cited examples of global economic cooperation in action during this crisis.
She noted that the G-20 recently announced further progress in developing strategies to lift medium-term growth by a collective 2 percent of GDP by 2018— holding the promise of more growth and jobs. Lagarde said looking at policies to reduce income inequality should be part of the equation.
“Excessive inequality is bad for sustainable growth. It is not conducive to sustainable growth. So if we want sustainable growth, which is the aim of all G20 leaders when they get together, then excessive inequality has to be the target, or one of the targets,” Lagarde said.
Officials from the 188 members of the IMF and the World Bank are attending the 2014 Annual Meetings. Under the broader umbrella of the formal sessions, there will be a host of meetings of different official groups, including the Group of Twenty advanced economies and emerging markets, the Commonwealth Finance Ministers, and the Group of Seven. There will also be meetings with civil society, academics, and the private sector.
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