File photo taken on June 16, 2014 shows International Monetary Fund(IMF) Managing Director Christine Lagarde speaking during a press conference at the IMF headquarters in Washington D.C., the United States. IMF on Friday announced that it selected Christine Lagarde to serve as its leader for a second five-year term. (Xinhua/Yin Bogu)
File photo taken on June 16, 2014 shows International Monetary Fund(IMF) Managing Director Christine Lagarde speaking during a press conference at the IMF headquarters in Washington D.C., the United States. IMF on Friday announced that it selected Christine Lagarde to serve as its leader for a second five-year term. (Xinhua/Yin Bogu)

Christine Lagarde, managing director of the International Monetary Fund (IMF), warned against negative competition in policies at the World Economic Forum happening here.

“If we end up in a race to the bottom on tax, financial regulation and trade, that would have devastating consequences,” she warned during a panel session on the 2017 global economic outlook, saying, “for me that would be a really big black swan.”

“Black swan” is a term used to describe an event that is often surprising and with a disproportionately major effect, often with negative consequences.

The IMF managing director questioned, in particular, the long-term results of combined American fiscal and trade policies.

“We have revised up the United States,” Lagarde said of the IMF’s outlook on announced fiscal policies for the incoming Trump administration of the United States.

The question we have that’s not completely clear, is how these fiscal measures will combine with trade measures,” she said. While fiscal stimulus would likely have a net positive on the United States economy, she said, the combination with trade policies would probably not be an overall net positive.

The IMF predicted “an upside in the short term,” with possible “negative spillover” from trade policies that many have worried will have protectionism, rather than globalization, as an effect. She questioned what the policy shift would be in the United States going forward.

Lagarde remained cautiously optimistic, however, about the overall global economic outlook for the year.

“In terms of numbers, we are seeing for the first time numbers that are not being revised down by the IMF,” she explained, noting that economies worldwide were improving, with the euro area doing notably better and in a recovery period.

She insisted, however, that growth would not be sustainable if it wasn’t inclusive, and “that means supporting those countries that are in the development process.”

The World Economic Forum, a Swiss non-profit organization, is holding its 47th annual meeting in Davos-Klosters, Switzerland, and has welcomed over 3,000 participants from across the world. Enditem

Source: Xinhua/NewsGhana.com.gh

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