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Lagarde warns against protectionism

September 28, 2016

IMF chief Christine Lagarde has said protectionism and other forms of trade restrictions would only lead to a longer period of low growth and painful inequality. She warned populist policies were no way out.

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Christine Lagarde
Image: picture-alliance/dpa/S. Thew

IMF Managing Director Christine Lagarde said at Northwestern University, Illinois, on Wednesday the global economy risked prolonged low growth and advanced economies faced painful inequality, warning against protectionist tendencies in many parts of the world.

"If we turn our backs on trade now, we would be choking off a key driver of growth at a point when the global economy is still in need of every good piece of news it can get," Lagarde said in prepared remarks.

She added that populist political currents rising in the developed world threatened to undo the progress made since the global financial crisis.

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Poor investment climate

"Especially for advanced economies, while there are some good signsthe overall growth outlook remains subdued," the IMF chief pointed out. She argued that high debt, weak demand, eroding work forces and labor skills were weakening incentives for investment, threatening to create what she called a "low-growth trap."

Lagarde acknowledged that falling commodity prices had hit the Middle East and poor countries in sub-Saharan Africa particularly hard.

She spoke ahead of next week's annual meetings of the IMF and the World Bank where development bankers will gather to discuss global efforts to reduce poverty.

hg/sri (Reuters, dpa)