A sluggish global economy, the Greek debt crisis and continuing fallout of the Ebola epidemic will take focus beginning Thursday when top finance officials gather for the World Bank and IMF Spring meetings.
With high unemployment festering in advanced economies, and emerging countries entering their fifth straight year of slowing growth, how to fire up output and demand is the primary order of business for the world’s central bankers and finance ministers in Washington.
Christine Lagarde, the managing director of the International Monetary Fund, has warned that the world risks sinking into an laconic “new mediocre” which does not lift people’s livelihoods.
“In too many parts of the world (growth) is not strong enough. In too many parts of the world, people do not feel it enough,” she said last week in a preview of the meetings.
In its update of global prospects this week, the IMF stuck to its forecast of “subdued” growth of 3.5 percent this year, picking up to 3.8 percent in 2016.
But IMF chief economist Olivier Blanchard warned that countries need to commit more effort to investments, especially in infrastructure, and implement market-opening reforms to increase output faster.
“It would be wrong to speak, as some have done, of stagnation, but prospects are more subdued,” he said. “And more subdued prospects lead, in turn, to lower spending and lower growth.”
Lagarde and her World Bank counterpart Jim Yong Kim have already warned middle and low-income countries that they face more financial turbulence ahead, as the US central bank tightens up monetary policy with fresh interest rate hikes later this year.
But Kim will also try to keep the focus on fighting extreme poverty, and is planning a new fundraising effort for long-term relief and rebuilding for the three West African countries savaged by the Ebola epidemic, Guinea, Liberia and Sierra Leone.
After the World Bank, the IMF and individual governments threw in hundreds of millions of dollars to confront the outbreak last year, Ebola is now mostly under control, though with a toll of more than 10,000 dead.
Oxfam International is urging the World Bank to raise $1.7 billion to help countries hit by the epidemic to improve their sanitary infrastructure.
Longer-term efforts are needed to build the capacities of the health care systems in each country to prevent a future outbreak, said Oxfam’s Washington office chief Nicolas Mombrial.
“If you don’t do anything, it will happen again,” he added.
– Shadow of Greek debt crisis –
The meetings will remain overshadowed by the impact of turmoil in the Middle East and Ukraine, where the IMF controversially signed off on its second bailout loan in a year.
Also clouding the discussions will be the showdown between Greece and its EU creditors, with Athens close to defaulting on its massive debt, which could force its split from the eurozone.
That could fuel a new round of turmoil across global markets, many worry.
Greek Finance Minister Yanis Varoufakis will be at the meetings, and even attend a White House commemoration of Greece’s 19th century independence struggle, where he could meet with President Barack Obama.
Stopping in New York on Wednesday ahead of the IMF-World Bank meetings, German Finance Minister Wolfgang Schaeuble said no deal had been reached yet between EU and Greek negotiators, but added that he does not expect Greece to leave the eurozone.
On the other hand, twice this week IMF officials said that the European Union has already put up firewalls to minimize the collateral damage of a Greek exit, and that if it does happen, it would be an opportunity for the eurozone to move from currency union to fiscal and political union.
“The rest of the eurozone is in a better position to deal with a Greek exit” than two years ago, said Blanchard.
“If it were to happen, I think the way to reassure markets and make progress is actually go further, use the opportunity to make progress in term of a fiscal union and a political union.”