IMF offers mixed outlook on global economy

The Brookings Institution held a discussion this afternoon regarding perspectives on the global economic landscape. The panel addressed concerns over the declining value of the dollar, rising inflation, the role of the International Monetary Fund (IMF) and what these factors mean for the future of the global economy.

According to John Lipsky, first deputy managing director of the IMF said that the Fund predicts global economic growth will drop an entire percentage point to 4 percent this upcoming year. In addition, Lipsky stated that a primary concern for the upcoming year should be increased inflation, particularly in developing economies.

Lipsky also expressed concern over the continued decline in the value of the dollar. While the United States has seen increased exports as a result of this decline, the drop has been one of the largest sustained episodes of dollar decline in the last 50 years. However, Lipsky said that despite drops in the value of the dollar, he believes it will retain its role as the dominant international currency in the long term, though perhaps sharing it with other powerful currencies like the euro.

Lipsky also predicted an economic slowdown in the EU. He said that this could potentially be more devastating than economic issues in the United States, due to a lack of coordination of financial markets within the EU.

Domenico Lombardi, nonresident senior fellow of the Brookings Institution and president of the Oxford Institute for Economic Policy expressed concern over IMF attempts to regulate currency imbalances. While the organization has been particularly useful with developing economies, Lombardi worries that highly developed nations like the U.S. may be less forthcoming with financial information, and less cooperative with policies and oversight from the Fund.