The International Monetary Fund (IMF) has said that the global economy faces an increasing risk of economic derailment unless steps are taken to boost global demand.
“We are clearly at a delicate juncture,” said David Lipton, the managing director of the IMF. The comments came after China reported weaker than expected trade figures. Exports had plunged by a quarter in comparison to one year ago.
The cause is a combination of low global demand creating deflationary pressures and a fall in labor supply and labor productivity growth, according to Lipton. Spurring economic growth through lowering interest rates is already reaching its limit, so the solution may be to increase government spending, particularly on infrastructure.
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