LONDON (Reuters) – The head of the International Monetary Fund said on Wednesday that international cooperation in a divided world was essential, to combat a phase of slow global growth that would persist for years along with high interest rates.
“Inflation is still high and that requires interest rates to remain high, throwing more cold water on growth” that is already slow at 3%, IMF Managing Director Kristalina Georgieva said at a panel discussion at the annual Future Investment Initiative (FII) conference in Riyadh.
Cooperation in a fragmented world is key for growth and “truly a matter of the highest priority,” Georgieva said.
The costs of fragmentation were very significant. “We have, on numerous occasions, demonstrated we are talking about chopping about 12% off global GDP,” she added, without giving a timeframe.
Georgieva said governments should react to lower global growth by applying “strong buffers through tax policies that guarantee revenues, and expenditure policies that guarantee investment in human capital investment in (the) long term.”
Global leaders also had a responsibility to “speak truth to power,” she said.
There had been a broad shift against globalization, despite it having tripled the size of the world economy and lifted 1.5 billion people out of poverty, “because not everybody benefitted,” she said.
“We have not done our job properly to secure opportunities for people on the losing side.”
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