Christine Lagarde, the managing director of the IMF, has warned against the damaging impact of the “sword of protectionism” on the health of the global economy.
In a speech in Brussels, the former Finance Minister for France, warned that despite a continually strengthening global economy, the “sword of protectionism” continued to stunt its progression. During the speech, Lagarde highlighted key risks ahead:
“…political uncertainty, including in Europe; the sword of protectionism hanging over global trade; and tighter global financial conditions that could trigger disruptive capital outflows from emerging and developing economies,” she said.
Most importantly, Lagarde highlighted the importance of global cooperation in uplifting the economy out of the throws of the worst recession since the Great Depression.
She stated:
“More recently, we worked together to ensure that the great recession did not become another Great Depression. Cooperation through a multilateral framework has benefited every country. Fostering more resilient growth therefore requires more international cooperation – not less.”
In addition, she remained critical of proposed of international trade barriers that have been suggested by the likes of the U.S.
She added:
“Restricting trade would be a self-inflicted wound that disrupts supply chains, hurts global output, and inflates the prices of production materials and consumer goods. And low-income households are hurt the most as they consume the largest part of their incomes,” she said.
The speech comes ahead of the IMF’s global growth forecasts, which are set to be released next week.
In December of last year, Lagarde’s position at the IMF was thrown into doubt after a French court pursued a negligence charge against her, which risked potential jail time.
The IMF chief was ultimately investigated for “negligence by a person in position of public authority”, after approving a compensation payment during her time as a minister in Nicolas Sarkozy’s government. Despite an eventual guilty verdict, Lagarde avoided punishment from the court and has continued in her role as managing director.