The first definitions of Georgieva at the head of the IMF

In her presentation to the IMF headquarters, the official predicted that the new report on the World Economic Outlook (WEO) would show downward revisions for 2019 and 2020. She also warned that the data would show a situation complex.

• In the United States and Germany, unemployment is at record levels.
• Nevertheless, in advanced economies, including the United States, Japan and, in particular, the euro area, economic activity is moderating.
• In some of the major emerging economies, such as India and Brazil, the downturn is even more pronounced this year.
• In China, growth is gradually slowing down from the rapid pace it has experienced for many years.

The Executive Director notes that "this poses challenges for many countries facing challenges, including some of the countries implementing IMF programs. "

Despite this general slowdown, it is expected that in almost In 40 emerging and developing market economies, including 19 economies in sub-Saharan Africa, real GDP growth rates will exceed 5 percent.

Digital Berlin Wall

For the IMF, "there are a number of problems and a common theme: Fractures. "

In this direction athe talks about the dangers of commercial fights and their impact on growth. The growth of world trade is virtually at a standstill. In part, he argues, because of trade tensions, that global activity in the manufacturing and investment sector has deteriorated significantly. There is a serious risk that services and consumption will soon be affected.

Currencies They are at the center of the stage. Due to the interconnectedness of economies, many other countries will feel the effects. Uncertainty – caused by trade tensions, but also by Brexit and geopolitical tensions – holds back the economic potential.

Even when growth resumes in 2020, the current cracks could lead to changes that will last a generation: interrupted supply chains, siled activity sectors and "Berlin digital wall " which forces countries to choose between technological systems.

At this point, the IMF, according to its director, should have for orThe goal should be to repair these fractures. The world we live in is closely linked. Therefore, the answers must be coordinated.

Return to the consequences of the trade war on the global economy due to the cumulative effect of trade disputes This could mean a loss of about $ 700 billion by 2020, or about 0.8% of GDP. This corresponds roughly to the size of the entire Swiss economy.

Solutions

The IMF warns that countries must take into account legitimate concerns related to business practices. It means subsidies, as well as intellectual property rights and technology transfers.

Indicate the person in charge "A more modern global trading system, and more specifically, the potential offered by trade in services and electronic commerce is fully liberated"

He encourages all countries to do more to help communities affected by technology and trade-related disorders.

Kristalina Georgieva recalled her childhood after the Iron Curtain and said that she knew "the cost of inadequate policies" because she also found that "the correct application of policies, with international support, can move a country and its people on the road to prosperity. "

recommendations

The IMF defines the fundamental priorities of internal economic policy to accelerate growth and build more resilient economies.

• Successful use of monetary policy and improvement of financial stability Central banks around the world are struggling to fulfill their mandate under difficult conditions. Its independence is the basis of good monetary policy. To do this, they must clearly communicate their plans, continue to rely on the data and, where appropriate, maintain low interest rates.

Especially, given that inflation remains moderate in many countries and that growth is weakening overall. However, interest rates are already very low, even negative, in many advanced economies. As a result, in these economies, the scope for scaling up the use of conventional tools could be reduced.

The persistence of low interest rates also has negative side effects and unintended consequences. Pension funds and life insurance companies that make riskier investments to achieve the performance they set for themselves.

The IMF says its role is that of supervision, because global investors are taking more risks. All this creates financial vulnerabilities. In some countries, companies are taking advantage of low interest rates to accumulate debt and finance mergers and acquisitions rather than investing.

According to IMF "In the event of a significant slowdown, the debt of companies at risk of default would increase to $ 19 billion, or nearly 40% of the total debt of the eight major economies." These figures exceed the levels observed during the financial crisis.

Low interest rates also encourage investors to seek higher yields in emerging markets.. This leaves many small economies exposed to a sudden reversal of capital flows.

As a result, the IMF warns that macro-prudential tools and methods are needed to better manage debt, reduce financial cycles of expansion and contraction, and contain volatility. The agency stresses that "Monetary and financial policies can not do the job alone. Fiscal policy must play a central role. "

Tax Policy

Kristalina Georgieva, says in his speech that "It is time for countries with fiscal space to use their fiscal capacity or prepare to do so." In fact, low interest rates could provide economic authorities with additional resources to spend.

In countries like Germany, South Korea and the Netherlands, increased spending – especially in infrastructure and research and development, would help boost demand and growth potential

But he warns that this recommendation does not apply to everyone. On a global scale, public debt is close to historical levels. Therefore, in the case of countries with a High debt-to-GDP ratio, fiscal restraint is justified.

The recommendation in these cases (applies to Argentina) is "debt and deficit reduction must always be achieved in such a way as to protect education, health and employment ".

For this, the IMF recommends creating greater fiscal space: the internal income must be mobilized.

In this regard, he considers that it is necessary: reduce corruption; use digital instruments for tax collection to increase resources; stimulate new investments in human resources and achieve sustainable development goals by 2030.

Work vs automation

The Fund warns that the loss of jobs resulting from automation and demographic changes is forcing countries to reform the structure of their economies.

A new IMF study – specifically focused on emerging and developing market economies – shows how structural reforms They can increase productivity and generate huge economic benefits.

These changes are the key to stronger growth in the medium and long term.

• In ChileChild care programs have increased women's participation in the labor market and stimulated economic activity. Demonstrate that women's empowerment is a factor of structural change in the economy.
• In Ghana, Anti-corruption legislation has generated more transparency and increased accountability.
• In Jamaica, which is finalizing a program supported by the IMF, the reduction of bureaucracy has facilitated the creation of new businesses.

International cooperation

The head of the IMF, while asserting that international cooperation is developing, warns however that "The willingness to participate decreases. Trade is an example. Of course, the multilateral agency encourages countries to work together.

For this purpose, the Fund recommends:

• Safely adapt techno-finance to the implementation of the financial regulation reform plan and the fight against money laundering and the financing of terrorism.
• Address climate change as it is a crisis to which no country is immune.

On this last point, one of the IMF's priorities will be to assist countries in the process of reducing carbon emissions and developing their resilience to climate change.

recommendations

At the current average carbon price of $ 2 per tonne, most citizens and businesses have little financial incentive to undertake this transition.

Limit global warming to a safe level the price of carbon must be higher. Some countries apply carbon taxes, like Sweden.

Incentives for investment should also be created, including investments in new technologies.

Green bonds are growing in Europe and in some parts of Asia

conclusions

For Georgieva, the new managing director of the IMF "If the slowdown in the global economy is more pronounced than expected, a coordinated fiscal response may be needed."

For the Fund "changes in spending are more effective and have

a multiplier effect when countries act together ". And remember the successful experience of the 2009 crisis.

He concludes his speech by inviting the 189 member countries to attend the IMF's annual meeting in Washington next week, "coming prepared to find solutions"