11 October 2013 16:58 [Source: ICIS news]
WASHINGTON (ICIS)--Global economies face a new frontier of risks over the next 10 years, and worldwide financial crises likely will become more probable and larger, International Monetary Fund (IMF) chief Christine Lagarde said on Friday.
Speaking to a joint meeting of the IMF and the World Bank, Lagarde said that long-term frontier risks will confront the 188 member nations of the fund.
“Over the next generation, the rate and reach of change is likely to be even greater than before,” she said.
Lagarde identified three main areas of global change that will confront national policymakers and government planners.
First, she said that the world’s economy - long dominated by industrialised countries in the West - will become more “multipolar”.
“In the next decade, the share of emerging and developing economies in global GDP will increase from about half to nearly two-thirds,” she said, “setting the stage for a world where economic power will be far more dispersed across all regions.”
Second, the global economy will become even more interlinked financially, a process that poses more risks as well as benefits, she said.
“As emerging and developing countries grow and converge, their financial interconnections will become deeper and more complex,” Lagarde said. That deeper integration, she added, “will fuel growth, but it will not be without risk”.
“Experience teaches us a vital lesson: greater financial integration raises the probability and size of financial crises,” she said.
Lastly, the IMF managing director said that “new frontiers of risk” will flow from key long-term trends.
“Demographic shifts, income inequality and environmental sustainability will affect growth and stability,” she said.
Lagarde said it was important that the IMF and World Bank cooperate more effectively with other institutions to help confront and manage new risks facing the global economy.
The IMF was established in the closing days of World War II to promote international monetary cooperation and stability, foster economic growth and employment and to provide financial assistance to countries to help ease balance of payments problems.
Under its multinational mandate, the IMF periodically reviews the economic conditions and stability of its 188 member countries and major trading regions, and it frequently offers overall global outlooks and forecasts.
Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy
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