By William Horobin
AIX-EN-PROVENCE, France–International Monetary Fund managing director Christine Lagarde said Sunday that public investment should be ramped up in some countries as the global economic recovery remains fragile and laborious.
“In the current context of a weak growth outlook and low borrowing costs, a judicious stimulation of public investment can give growth the necessary impetus, above all in advanced economies,” Ms. Lagarde said at the Rencontres Economiques conference in the south France.
But Ms. Lagarde said several conditions must be met for a country to increase investment, including affordable financing and an actual need for increased infrastructure. She said many of the world’s leading economies have large infrastructure needs–particularly the U.S., the United Kingdom and Germany–while others, such as France, have less need.
The key condition for relaunching public investment is strong public finances, she said.
“The sustainability of public finances should be one of the necessary conditions before taking such decisions,” Ms. Lagarde said.
Still, the head of the IMF also said that public investment could stimulate growth, which would stabilize or even reduce debt levels relative to gross domestic product.
Ms. Lagarde’s comments come ahead of an update later in July of the IMF’s economic forecasts, which she said would be “very slightly different from April.”
Write to William Horobin at [email protected]