By Isaac Cohen*
Before the start of the Spring Meetings of the International Monetary Fund and the World Bank, last week in Washington DC, the Managing Director of the Fund Christine Lagarde warned there is a risk the world economy could settle into what she called a “new mediocre.”
In the advanced economies this consists of persistently low inflation, high unemployment and stagnation risks. While in emerging market economies it means lower potential growth and lackluster domestic demand.
The Fund’s World Economic Outlook confirmed that growth this year will be “moderate and uneven.” With the exception of the United Kingdom and the United States, most advanced economies are growing modestly, with a slight increase of 2.4 percent this year, better than 1.8 percent last year.
Most emerging market economies will undergo slower growth this year at 4.3 percent, instead of 4.6 percent last year. India has replaced China as the fastest growing emerging market economy, while the major commodity exporting economies in South America, Argentina, Brazil and Venezuela will experience contractions this year.
During the meetings, the negotiations on Greece dominated the headlines, but most high officials expressed concern about the slowdown in global growth. European Central Bank President Mario Draghi said “It’s premature to talk about vibrant growth.” The new chairman of the Fund’s Monetary and Financial Committee and head of Mexico’s central bank, Agustin Carstens said “the world economy is not out of the woods.”
*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio. Former Director, UNECLAC.