IMF warns G20 nations to use 'forceful policies' to increase global growth
The International Monetary Fund (IMF) is urging G20 nations to adopt forceful policies to avoid a prolonged economic slowdown just days ahead of a key meeting of global leaders.
The Washington-based organisation said the world's 20 major economies are collectively falling short of their ambitions to raise gross domestic product (GDP) by an additional 2% by 2018, the IMF's G20 Surveillance Note said.
Record low interest rates are failing to boost investment levels amid muted demand, high corporate sector debt and weak financial sector balance sheets, the IMF explained.
The IMF is now calling on G20 states to boost public investment, tackle public sector debt, and implement more equitable tax regimes. At the national level, governments should build workers' skill, increase their mobility and promote trade integration, the IMF said.
The publication was released shortly before the G20 leaders' summit in Hangzhou, China, set to take place on Saturday and Sunday.
Heads of state from across the G20 states, including the UK, Germany, France, Australia, and Canada are expected to attend.
"This meeting comes at an important moment for the global economy. The political pendulum threatens to swing against economic openness, and without forceful policy actions, the world could suffer from disappointing growth for a long time," IMF Managing Director Christine Lagarde said in an accompanying blog post.
Despite a strong recovery in the wake of the financial crisis, G20 emerging market growth has declined in the past five years.
IMF forecasts suggest 2016 will be the fifth consecutive year where global gross domestic product (GDP) growth falls below 3.7%, which was the average rate of growth in the 17 years to 2007.
The global economy hasn't had such a prolonged stretch of weak growth since the 1990s, the IMF explained.
Recent developments including the UK's EU referendum have taken their toll and, while financial markets have largely recovered from their post-Brexit lows, risks remain.
"Financial volatility could return, triggered by geopolitical tensions or risks associated with the negotiations after the "Brexit" vote," the note suggests.
Without forceful action and co-ordinated policies, emerging market growth is expected to stay around historical averages of 5.5%, the IMF said.
Meanwhile, growth among advanced economies will contract below historical averages of 2.5% at 1.5%.
The weak outlook could put off already-weak investment, further dampening underlying potential growth, the report explained.