IMF chief cautions against reverse globalisation

"A retreat from globalisation and multilateralism is a serious risk at a time when international cooperation and coordination are as critical as ever," Lagarde said in her policy paper presentation at the start of the annual fall meetings of the IMF and the World Bank.

“This persistent underperformance (global growth) has exposed complex underlying trends in many countries -- including the difficulty for some groups to adjust to rapid changes in the global economy," she said. The IMF chief said that in many advanced economies, demand is low with the post-crisis recovery being uneven across countries, and output gaps are still negative.

Productivity growth has not recovered, and its likely reasons owe to several factors that hinder investment, including debt overhangs, and low and uncertain prospects of future demand. "Emerging economy growth improved overall, driven by robust activity in emerging Asia and large stressed economies showing some signs of improvement. Yet vulnerabilities, especially in the corporate sector of some large countries, have persisted," Lagarde said, arguing that not enough has been done to address the concerns of those who have been adversely affected, creating social tensions and political backlash.

This situation has added to a political climate that favours inward-looking policies, makes reforms more difficult to enact, and puts at risk the well-established overall gains in productivity from globalisation and technological change, she contended. The global economy has benefited tremendously from globalisation and technological change, particularly with regard to expanding consumers' access to goods and services and helping to lift millions out of poverty in emerging markets and developing countries, she added.