imf chief christine lagarde warns of weak global growth 2 1380432015

A United Nations initiative comprising 17 new development goals, which seeks to eradicate global poverty and hunger by 2030, due to be adopted Friday, may be hamstrung by weak global growth said IMF head Christine Lagarde.

Though earlier such initiatives were supported by solid growth across China and emerging markets, this time around the task will be much more difficult to achieve because of the almost all-pervasive environment of slowing global economic growth.

“The outcome of the exercise will not be as massive as we have seen with the millennium development goals,” Ms. Lagarde said, because “the downside risks are greater.”

The IMF is expected to trim its economic growth estimates when it publishes them next month, taking into account the worse than expected downturn in the Chinese economy. “The slowdown of Chinese growth was predictable, predicted, but has consequences and probably more spillover effects in the region in particular than was anticipated," Lagarde said.

In a sombre reminder of the scale of the UN’s task, the number of people looking for employment is estimated at 200 million, up by 6 per cent from the days before the global financial crisis. The commodities meltdown and bruising currency depreciation are together dealing body blows to emerging economies, affecting their ability to implement social development programs.

“That is going to be a challenge, there is no doubt about it,” Ms. Lagarde said, speaking at a Brookings Institution event. "It would be a lot easier if the world was cruising at 5.5 (percent), 6 percent global growth than it is at the moment," she added.

“There is a chance that we have entered a period of structurally weak demand, which will require very low interest rates,” said outgoing IMF Chief Economist Olivier Blanchard recently. “And low growth combined with increasing inequality, is not only unacceptable morally, but extremely dangerous politically.”

Emerging economies may face more hardships once its highly telegraphed hike in interest rates is implemented by the US Fed. The hike will push up costs of servicing their dollar-denominated debt, exacerbating the strain on revenues from low commodity prices.

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