The world is a study in contrasts nowadays. We are haunted by images of terror and warfare. Yet every region of the globe has experienced some of the strongest economic growth seen in years, inflation remains subdued despite surging oil prices, and financial markets are doing well. Several economies that recently faced financial crises are rebounding strongly. At the same time, much more needs to be done to help prevent future crises and reduce poverty.
What do these contrasts mean for the future? The answer depends crucially on how each country and the international community respond to key policy challenges: addressing global imbalances through macroeconomic policies and long-overdue reform; meeting the costs of aging populations; strengthening defenses against economic and financial crises; and delivering on the pressing imperatives of poverty reduction.
Recently, financial leaders from 184 countries met in Washington at the Annual Meetings of the IMF and World Bank. This year marks the sixtieth anniversary of the Bretton Woods Conference that established those two organizations as pillars of international economic cooperation. As IMF Managing Director, my message was one of vigilance and action. Simply put, the international community must take advantage of the current recovery to broaden efforts to ensure financial and economic stability, and help those countries with limited prospects.
Periods of strong economic growth allow countries to put in place defenses to reduce the likelihood and severity of future downturns. But such opportunities are all too easy to squander. In an era of globalized financial markets, when countries can find it hard to cope with rapid cross-border capital flows, there is no time for complacency. A lesson of the 1990's is that vulnerabilities must be dealt with before they become crises.