Abu Dhabi, UAESunday 9 August 2020

European Central Bank's incoming president says a global recession is unlikely

Christine Lagarde takes the helm of the central bank at a challenging time for Europe’s economy

Christine Lagarde says the world economy is likely to avoid an outright recession. Bloomberg
Christine Lagarde says the world economy is likely to avoid an outright recession. Bloomberg

The incoming European Central Bank President Christine Lagarde said the global economy is likely to avoid outright contraction but questions remain on growth prospects, with trade tensions posing the biggest threat to the outlook.

“It is not in the baseline to have a recession,” Ms Lagarde told Bloomberg on Tuesday. “That said, it’s mediocre growth, it’s at risk because of essentially one major threat, which is the trade war that we see developing or brewing and the uncertainty it generates for investors.”

The comments by the former managing director of the International Monetary Fund, who is getting ready to take the reins of the ECB, come at a time when both global and Eurozone economies are in disarray and there are growing divisions within the ECB.

The latest data indicated on Monday that Germany’s private sector shrank in September for the first time since 2013. The Eurozone is still dealing with the fallout from a sovereign debt crisis and its economy is also under threat from the prospect of a no-deal Brexit, which would put millions of jobs and billions of euros of revenue at risk.

The IMF has already revised its global economic growth estimates downwards for 2019 several times, reducing it to 3.2 per cent in July – the weakest level since the 2008 financial crisis. The fund will release its latest economic projections in October.

Ms Lagarde said that she was initially hesitant to taker the helm of the ECB because she had not held such a major policy making role in the past, but promised her lack of experience wouldn’t prove to be a handicap.

“There’s such a strong and intelligent and powerful staff within the institution that I will get the right support, the right expertise,” she said. “There’s a fantastic member of the board, Philip Lane, who was himself former governor of the central bank of Ireland, and the board members are talented in their own respects.”

In an interview with The National earlier this week, Ms Lagarde said one of her jobs “is to constantly remind those ‘new turks’ that a crisis can be around the corner, that sustainable growth, solid growth, stable growth, is critically important as it is important that it be inclusive”.

Updated: September 25, 2019 04:29 PM

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