The International Monetary Fund (IMF) anticipates a storm. Before opening the summit next week in Bali (Indonesia), the Fund is concerned about the progress of the international economy in recent months and, above all, what may happen in the next. The director-manager of the agency, Christine Lagarde, did not worry only about the slowdown in the economy -global GDP will grow less than the 3.9% predicted just three months ago-, but in a speech delivered in Washington on Monday. for dangers that until recently seemed hypothetical; and that are now materializing.
Lagarde also warns about a problem that had never really ceased to exist, but now seems more present than ever. Global debt – both public and private – strikes record after record. According to the economists of the Fund, it has already reached 182 trillion dollars (about 157 trillion euros at the current exchange rate). More or less the equivalent to 156 times the Spanish GDP. Since its report last spring, the figure has increased by 18 trillion dollars.
The monster of debt does not stop growing. It surpasses the level of 2007 by 60%, a year before the Great Recession came with all its virulence to change the world. And this figure is more worrying now that the period of monetary stimulus by the big central banks seems to have come to an end.
"Governments and companies are now more vulnerable to a tightening of financial conditions. Emerging and developing economies are already feeling the pinch as they adjust to a monetary normalization in the advanced world, "said Lagarde in Washington. To make matters worse, this situation can go much worse. Because in the IMF they forecast abrupt corrections in the market and in exchange rates if the process of hardening financial conditions continues to go further.
Lagarde began his intervention with the good news: the world continues to grow at the highest rate since 2011, unemployment continues to fall in most countries and the percentage of people living in extreme poverty has reached a new low, below 10% of the world population. They are important events, yes, but the joys end here. Because, according to the head of the Fund, "the climate of the global economy is beginning to change." If a year ago Lagarde recommended taking advantage of the good run to make reforms – "The sun shines. Fix the roof, "he said; and six months ago he warned of the dark clouds on the horizon, now he recognizes that the risks he saw then "have begun to materialize".
And, as the Fund and various institutions have warned on other occasions, the greatest risk is the unleashing of a commercial war. The problem is that this is no longer a hypothetical danger, but that, in Lagarde's words, "the rhetoric is mutating into a reality in a new reality of effective trade barriers". These not only harm trade, but also investment and industry, which are hurt by rising uncertainties, continued the managing director of the IMF. For now, among the developed economies, the most affected by this new climate of discontent are the eurozone and Japan. Meanwhile, the United States, the real trigger of this new wave of protectionism seems to be better resisting the gale in principle, thanks to the expansive fiscal reform of the Trump Administration. But all this can change if commercial fights continue. Leaving for now already some clear losers: the emerging countries, which are already suffering the negative repercussions of these tensions. In case the tariff war gets worse, Lagarde has a recommendation. "If agreements can not be reached between all countries, governments can use flexible trade pacts in which those with a similar way of thinking collaborate in the framework of the World Trade Organization," he added.
Lagarde also spoke of the loss of jobs associated with the technological revolution, but he did mention an aspect that is usually overlooked: how this destruction -26 million jobs are at risk of disappearing in the 36 countries of the OECD – affects mostly women. The argument is that these tend to occupy positions with routine activities, and these are precisely the most threatened by automation.