According to the Fund's chief economist, Gita Gopinath, the main concern is "political uncertainty".
"Do not do anything wrong. Do the right thing. " This vademecum of the Managing Director of the International Monetary Fund (IMF), Christine Lagarde, for the attention of governments, will have hovered over all the discussions of the spring meetings of the institution and the World Bank that have ended, Sunday, April 14, in Washington.
The world economy is at a singular moment. This spring, the IMF revised its forecasts down for the third time in six months. For 2019, it now forecasts global growth of 3.3%, the lowest since the end of the financial crisis. A rebound is expected, as growth resists in the United States and there are signs of recovery in China. But a relapse is not excluded. It must be prepared, with constrained means.
"Central banks, with their relatively accommodating policies, have reduced financial risks", recalls the new chief economist of the Fund, the American-Indian Gita Gopinath, in an interview with World. But most have now exhausted their panoply of exceptional tools: very low rates, liquidity injections, sovereign debt buybacks …
In the camp of governments
If the slowdown becomes more severe, continues Mme Gopinath
"Monetary policy may still be a little activated, especially on the unconventional side. But the room for maneuver is limited and the central banks do not want us to rely entirely on them to solve everything. Fiscal policy will also have to play an important role. "
So the ball is in the hands of governments, which do not have endless resources either, while public debt has exploded all over the world. Low borrowing costs seem to remove any sense of urgency. But the Fund stresses that there is no "Free meal". Rates can go up. A new crisis can happen. It is not long before we restore the sustainability of public finances.
The challenge is to be ready if the economic slowdown becomes more brutal. In such a scenario, the IMF calls on states to act in a coordinated manner, each according to its situation, to support the activity. "Some have margin, like Germany. They can do more, if necessary, than other countries ", Gita Gopinath details. A stimulus applied synchronously "Would build confidence"says the economist.