23 January 2016•Update: 25 January 2016
DAVOS
Europe's economy is in better shape than a year ago, but International Monetary Fund (IMF) has two concerns, the fund’s chief Christine Lagarde said Saturday.
Speaking at the Global Economic Outlook session on the last day of the World Economic Forum annual meeting in Davos, Lagarde said the economy in Europe is certainly in a better shape, “but there are two big concerns”.
“One is Brexit (the U.K. leaving the European Union), and whether there is a deal between the United Kingdom and the rest of Europe. The second is of geopolitical nature including the refugee crisis, though not directly about economy,” Lagarde said.
However, Lagarde said if the process for integration of refugees is handled well, it will be an upside for the eurozone, boosting growth particularly in Sweden and Germany.
On global economy, Lagarde said that India and China are performing much better than Brazil or Russia.
"We used to talk of BRICS but their economic performance is very different from each other. India is growing fast at over 7 percent, China has slowed down, Russia and Brazil are going to be negative territory for different reasons.”
Lagarde said that her fund believes the global economy will grow at a faster rate in 2016 than 3.1 percent in 2015.
The IMF expects the growth at 3.4 percent in 2016 and 3.6 percent in 2017.
She also said “the triple transition of the Chinese economy”, “commodity prices”, and “capital flows” are the major risks on the horizon for the global economy.
Lagarde said China’s economy is re-balancing “as it moves from industry to service, export to domestic market and investment to consumption”.
A good deal for the UK and the European Union
Speaking at the same session, British Finance Minister George Osborne said the U.K. has three priorities through its EU renegotiation.
“We want to create a more competitive European Union, to create more jobs and growth. We want to address concerns about migration. We need a better working relationship between euro and non-euro countries,” Osborne said.
Osborne said that he is optimistic of getting “a good deal for the U.K. and the European Union”.
Inflation in Japan ‘could strengthen if oil price recovers’
Haruhiko Kuroda, Japan’s central bank chief, said that China’s slowdown is due to the challenge of re-balancing its economy.
“Markets have been volatile this year, against heightened uncertainty over China’s economy and oil prices,” Kuroda said.
The central bank chief said the bank will do whatever it takes to get inflation, currently around zero, up in Japan.
He said the inflation could strengthen significantly if the oil price recovers. “The Bank of Japan is fully committed to achieving the price stability target of 2 percent and will do whatever it takes to achieve that target, at the earliest stage…We don’t believe there are any limits to our policy tools,” Kuroda added.
