The head of the International Monetary Fund says that six years after the financial crisis, the world is still mired in a disappointing economic recovery and will only be able to regain momentum through improved government policies.
IMF Managing Director Christine Lagarde said Thursday that the world has experienced a sub-par recovery that is "brittle, uneven and beset by risks." Those risks include potential escalation of the strife in the Middle East and Ukraine, as well as the Ebola outbreak in Africa.
'There is a recovery, but as we all know ... the level of growth and jobs is simply not good enough' - IMF head Christine Lagarde
Policymakers must pursue reforms to break out of a prolonged period of mediocre growth, Lagarde said in a speech at Georgetown University to preview next week's meetings of the 188-nation IMF and its sister lending agency, the World Bank. She called for reforms of labour markets and increased spending on infrastructure.
"There is a recovery, but as we all know ... the level of growth and jobs is simply not good enough," Lagarde said. "The world needs to aim higher and try harder."
She said a mix of bolder policies were needed to make sure that the "new mediocre" doesn't become permanent.
In addition to the IMF and the World Bank, finance ministers and central bank presidents of the Group of 20 nations will hold discussions on Oct. 10. Treasury Secretary Jacob Lew and Federal Reserve Chair Janet Yellen will represent the United States.
Among advanced economies, Lagarde described current growth as strongest in the United States and Britain, modest in Japan and weakest in the group of European countries that use the euro currency.
More than 200 million people are still unemployed around the world, about 75 million of which are young people, she said. And with the exception of the top 1 percent, most people have seen their incomes stagnate or shrink in recent years.
Job training and infrastructure spending
She called for increased job training to attack unemployment and weak wage growth and suggested that some nations consider expanding labor market participation, especially among women.
"Our main job now is to help the global economy shift gears and overcome what has been so far a disappointing recovery: one that is brittle, uneven and beset by risk," Lagarde said.
"It means a mix of bolder policies to inject a 'new momentum' that can overcome this 'new mediocre' that clouds the future."
Lagarde said that public investment in infrastructure was also critically important, citing one estimate that $6 trillion would be needed globally for electricity grids, roads and other infrastructure over the next 15 years.
"There is an obvious imperative in many countries where bottlenecks and obstacles to transportation and energy supply abound and hamper development," she said.
Lagarde praised a commitment made by the G-20 finance officials meeting last month in Australia to pursue strategies to lift economic growth by a collective two per cent or $2 trillion over the next five years.