International Monetary Fund (IMF) managing director, on Sunday said
a speech at the Le Cercle des Economistes' Rencontres Economiques
d’Aix-en-Provence economics symposium in her homeland, France, that the global
"recovery remains modest and fragile."
She quoted Marcel Pagnol
(1895 – 1974), the French novelist, playwright, and filmmaker, who
famously said: “The reason people find it so hard to be happy is that they
always see the past better than it was, the present worse than it is, and the
future more complicated than it will be,” and hinted that the Fund will revise
down its forecast of global growth this year despite a pickup in the US economy.
The IMF chief said: "The crisis was deep and
long. It left behind long-lasting scars that still need to heal. At the height
of the crisis, bold responses by policymakers helped prop up activity by
sustaining demand. Yet, more than five years into the crisis, the fragility of
the ongoing recovery points to a role for supply side policies to support
She added: “The global economy is gathering
speed, though the pace may be a bit less than we previously predicted because
the growth potential is lower and investment” spending remains lacklustre.
Countries such as the US, UK and Germany have
infrastructure deficits and while "the sustainability of public finances should
be one of the necessary conditions before taking such decisions," public
investment could stimulate growth, which would stabilise or even reduce debt
levels relative to gross domestic product.
Lagarde said: "According to the World Economic
Forum, global spending on basic infrastructure—transport, power, water and
communications—currently amounts to US$2.7tn a year when it ought to be
US$3.7tn. The US$1tn gap is almost as big as South Korea’s GDP. These are huge
Fiscal policy can certainly help. If
appropriately designed, it can support long-run growth potential, including by
enhancing infrastructure investment."