The International Monetary Fund and World Bank have called for governments to improve economic resilience as it is the most important factor in staying afloat when facing heavier global pressures, while also continuing long-term development programs that will pave the way for better welfare.

In her opening remarks for the Annual Meetings of IMF-WB Group in Bali on Thursday, IMF managing director Christine Lagarde said the global economy was probably not strong enough to push for higher growth, which would reach a plateau if the rate continues at 3.7 percent for three years in a row by the end of this year.

Lagarde saw that the distribution of growth worldwide was “more unevenly allocated”, while several risks that were highlighted during the fund’s Spring Meetings in April this year had begun to materialize, especially from the erection of trade barriers in several countries.

“And if these tensions were to escalate, the global economy would take a significant hit,” she said at a press conference, hinting that the escalating trade tension between the United States and China was part of the pressures.

Lagarde said the IMF strongly suggested that countries de-escalate tensions and work toward a global trade system that is “stronger, fairer, fit for purpose and fit for the future”.

She warned that a trade system that refrained from sufficiently covering services and digital transformation would risk countries losing out on the productivity gains that they could have.

In her annual flagship Global Policy Agenda statement published on Thursday, Lagarde reminded governments that a rapid reversal in financial markets 10 years after the global financial crisis could again expose debt vulnerabilities at a time when many countries had more limited fiscal space.

According to IMF data, global debt rose to a new record high of US$182 trillion in 2017, although the pace of growth indicated a slowdown years after the global financial crisis in 2008.

IMF fiscal director Vitor Gaspar said on a separate occasion that rising global debt was partly driven by governments’ policies, particularly in advanced economies, to provide stimulus as they recovered from the 2008 financial crisis.

With vulnerabilities mounting, Lagarde said policymakers should act immediately in using the ongoing expansion to rebuild buffers to counter shocks, enhance resilience and advance structural reforms for the benefit of all people. Countries should also resolve policy uncertainties that might discourage investment, she said.

Emerging markets and developing countries, including Indonesia, should aim at reducing their vulnerabilities to tighten financial conditions, sharp currency movements and capital flow reversals, including by managing contingent liabilities and balance sheet mismatches, Lagarde said.

“The fund [IMF] will help members calibrate appropriate macroeconomic policy responses tailored to their circumstances,” she said.

Separately on Thursday, WB president Jim Yong Kim said in his opening remarks that the bank was focusing on two long-term issues critical to every country, namely climate change and human capital development.

“Climate change is an existential threat to global development and efforts to end poverty. The warming planet is already having an impact on the poorest and most vulnerable,” he said.

The WB also unveiled the Human Capital Index, which ranks countries according to how well they are investing in human capital for the next generation. The index is part of the global effort led by the bank to boost investment in people to improve economic growth.

The new human capital index measures the progress of each country toward the highest standard of education and health.

“Policies to build human capital are some of the smartest investments that countries can make to boost long term, inclusive economic growth,” Kim said.

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