Global growth has further strengthened and is increasingly broad-based, driven by a strong rebound in investment and trade, according to a communiqué of the 37th meeting of the International Monetary and Financial Committee held recently.
Chaired by Mr. Lesetja Kganyago, Governor of the South African Reserve Bank, the IMF said risks are broadly balanced in the near term, but remain skewed to the downside beyond the next several quarters.
"Rising financial vulnerabilities, increasing trade and geopolitical tensions, and historically high global debt threaten global growth prospects. Demographic headwinds and subdued productivity growth may reduce the potential for higher and more inclusive growth going forward," it said.
The window of opportunity remains open and should be used expeditiously to advance policies and reforms that sustain the current upswing, enhance resilience, and raise medium-term growth for the benefit of all.
"We will continue to use all policy tools to achieve strong, sustainable, balanced, inclusive, and job-rich growth. In line with central bank mandates and mindful of financial stability risks, monetary accommodation should continue where inflation remains weak and be gradually withdrawn where inflation looks set to return to central bank targets. Fiscal policy should be flexible and growth-friendly, rebuild buffers where needed, avoid procyclicality, create space to invest in infrastructure and workforce skills, and ensure that public debt as a share of GDP is on a sustainable path".
Structural reforms should aim to lift productivity, potential growth, and employment, while effectively assisting those bearing the cost of adjustment.
"We stress the importance of timely, full, and consistent implementation and finalization of the financial sector reform agenda as soon as possible to further strengthen financial sector resilience. We will continue to monitor and, if necessary, address emerging risks and vulnerabilities in the financial system. Policies should also enhance inclusion to widely share the gains from technology and economic integration and manage associated risks. We will work together to reduce excessive global imbalances in a way that supports global growth by pursuing appropriate and sustainable policies," the IMF commented.
Strong fundamentals, sound policies, and a resilient international monetary system (IMS) are essential to the stability of exchange rates, contributing to strong and sustainable growth and investment. Flexible exchange rates, where feasible, can serve as a shock absorber.
"We recognise that excessive volatility or disorderly movements in exchange rates can have adverse implications for economic and financial stability. We will refrain from competitive devaluations, and will not target our exchange rates for competitive purposes," the IMF said.
-rmc//