By Emeka Anaeto, Business Editor
At the backdrop of increasing impressive performance of the global economy, the Managing Director of the International Monetary Fund, IMF, Mrs Christine Lagarde, has warned of some dangers in the horizon, as world debt rises to $164 trillion.
Addressing the media on the sidelines of the on-going Spring Meetings of the World Bank Group in Washington DC, United States of America, yesterday, Lagarde warned that while most of the nations around the world are experiencing growth, they should endeavor to get ready for a downside effect sooner than later. She, however, indicated that some countries are not enjoying the growth.
Linking up the upwards review of its global growth projection of 3.9 percent, up from 3.7 percent, she said, “it is clearly a pickup in our projections, and we maintain it this year and next.”
Lagarde also stated: “The momentum has been driven by stronger investment and a rebound in trade. It is broad-based, and it involves the USA, Europe, Japan, China, as well as many other emerging and developing countries, yet not all.
“So overall, the near-term prospect for the global economy continues to be bright. At the same time, while the sun is shining we are seeing more clouds accumulating on the horizon than we did back in October 2017.
“Some of you will remember that back in October, we said it is when the sun is shining that that you fix the roof. So first thing, have some governments taken measures to fix the roof? Well, some have, but certainly not all; and more needs to be done to sustain this upswing and foster long-term growth.
“The second downside risk, global debt is at all time high. It stands at $164 trillion, which is 225 percent of gross domestic products, GDP, of which the private sector accounts for two-third. Public debt in advanced economies is at levels not seen since Second World War. And in low income countries, if recent trends continue, many, not all, will face unsustainable debt burdens.
“Third cloud, financial vulnerabilities have increased due to high debt, rising financial market volatility, and elevated asset prices. A sudden tightening of financial conditions could lead to market corrections, unsustainable debt, and capital flow reversals.”