Sharp falls in global stock markets this month underline the need for governments to take advantage of current economic growth to undertake financial and economic reforms including boosting spending on infrastructure and social safety nets, International Monetary Fund Managing Director Christine Lagarde said.
Governments should reform financial markets, upgrade labor laws and lower barriers in protected industries, as well as taking measures to increase government revenues, Lagarde said at an IMF conference in Jakarta on Feb. 27.
"Recent volatility in financial markets has been a reminder that a fundamental economic transition is underway. Policymakers around the world ... are preparing for the gradual normalization of monetary policy in major advanced economies," she said, noting that in January the IMF raised its global growth forecast to 3.9% for 2018 and 2019 from a prior estimate of 3.7% for both years.
"The time to repair the roof is when the sun is shining," she said.
"Repairing the roof also means using fiscal reforms to generate higher public revenues, where needed, and improve spending. By boosting public finances, countries can increase infrastructure investment and development spending, especially on social safety nets for the most vulnerable."
Lagarde also urged ASEAN countries to improve their long-term growth prospects by working toward regional integration, removing nontariff barriers, allowing for labor mobility and strengthening anticorruption frameworks.