In an optimistic speech, IMF managing director Christine Lagarde this month spoke of the potential for the ‘seven weak years’ of the recession to now lead into ‘seven strong years’ for global economies.
Speaking in Washington DC on January 15th, she explained that 2014 is a milestone year, representing 25 years since the fall of the Berlin Wall, 70 years since the inception of the IMF at the Bretton Woods conference, and 100 years since the start of the First World War.
But she added a note of hope that it might also bring to an end the seven-year cycle of economic turbulence that dates back to shocks like the sub-prime lending crisis, which may feel like a lifetime ago for many people.
“This crisis still lingers,” she conceded. “Yet, optimism is in the air: the deep freeze is behind, and the horizon is brighter.”
She added, however, that there are still risks that must be recognised and resisted, such as the threat of deflation – which she called the “ogre” that stands opposite the “genie” of inflation.
“Getting beyond the crisis still requires a sustained and substantial policy effort, coordination, and the right policy mix,” she warned.
Achieving realistic growth in the years ahead could mean ensuring it reaches all people in all economies, and that ‘positive’ figures are not simply the result of exceptionally strong performance by a small group of outliers.
For instance, in the US, only 1% of people shared 95% of income gains since 2009, which Ms Lagarde said “is not a recipe for stability and sustainability”.
During the recession, three quarters of all global growth can be assigned to just a handful of emerging markets, notably the BRIC countries, and as these begin to see slower growth, again it will be important to achieve more sustainable expansion across the globe in general.
Ms Lagarde called for policies to be set that reward people in jobs, while underpinning sustainable growth, and added that, until robust growth is achieved, central banks in developed economies must continue to consider unconventional approaches to monetary policy.