World economy looks hopeful – but warnings abound

It has been a lean few years for the world economy.

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But International Monetary Fund managing director Christine Lagarde says that looks set to change.

“We are forecasting growth in 2017 at 3.5 per cent and 2018 at 3.6 per cent, and that’s a significant uptick from 2016, which was only at 3.1 per cent, which is all good news. But we need to make sure that this momentum is sustained and that we continue to have that growth and more, and, importantly, that that growth is shared more equitably.”

On the question of trade, Ms Lagarde says more work needs to be done but the IMF will be part of it.

“Is trade going to continue to increase and grow? We do think so. Is trade operating in a perfect environment with the perfect setting? No. Is there room to improve that? Of course. Should it be done in a cooperative forum, such as on the occasion of a week like this, with all finance ministers around and talking to each other in a cooperative setting and forum such as the IMF? Yes, we think so.”

The International Monetary Fund’s outlook comes in advance of meetings in the United States with the World Bank and the Group of 20 major economies.

The international picture is gradually strengthening, especially in many major economies, despite resistance to free trade and despite political unrest in some countries.

But the IMF’s optimistic forecast does come with a distinct warning from World Bank Group president Jim Yong Kim.

“There are still many downside risks, however, and countries that have the fiscal space need to continue with structural reforms. This is vital to accelerating the sustainable and inclusive economic growth needed to end extreme poverty by 2030. We’re meeting in a time when we face several overlapping crises, both natural and man-made, all of which add urgency to our mission.”

The World Bank Group undertook a study to gauge how satisfied people are and found access to the internet is increasing short-term satisfaction.

But even that picture is not all rosy.

The World Bank Group president says the expansion of technology will have a huge impact on today’s jobs.

“We estimate that two-thirds of all jobs that currently exist in developing countries will be wiped out by automation. At the same time, the internet, smart phones and social media allow everyone to see exactly how everyone else lives, which is causing aspirations to rise all over the world. I see this everywhere I go.”

The study suggests the sense of what is possible expands with technology.

It says rising aspirations, and the chance to connect them with opportunities, can lead to great dynamism in society.

But that, too, comes with a warning from the World Bank Group president.

“If those rising aspirations then meet frustration, we are very worried about more and more countries going down the path of fragility, conflict, violence, extremism and, of course, eventually migration, because the other thing that access to the internet does is it increases people’s desire to migrate.”