Christine Lagarde, President of the European Central Bank, recently sat down for an exclusive interview with CMG. On the global economic outlook, she said the world economy has shown resilience far beyond expectations in the face of shocks such as the Russia-Ukraine conflict and the energy crisis, but negative effects exist too: the evolution of the geopolitical situation and people's actions are hindering economic development that could otherwise be achieved.
Q: During the IMF-World Bank annual meetings, the world economic outlook was undoubtedly the core topic. With inflation pressure, geopolitical tensions and trade uncertainty reshaping the global landscape, how do you view the global economy? What worries you most?
Lagarde: 'What surprised me most about the global economic outlook is the resilience the world economy has shown. A year or two ago, we generally judged the situation would keep deteriorating and growth would fall back — whether in advanced, emerging or low-income economies, after nearly six years of multiple shocks. We went through COVID, the Russia-Ukraine conflict, the energy crisis, then new conflicts and a new round of energy crisis. Most economic advisers and experts at the time believed economies would underperform and be severely hit. But contrary to everyone's expectation, the global economy showed resilience far beyond expectations. That is the positive side. What is regrettable is that the negative side also surprised me. The geopolitical situation is undermining economic policies that were on the right track. In my own domain: after the pandemic, once the energy crisis triggered by the Russia-Ukraine conflict gradually subsided, our inflation had returned to the 2% medium-term target. Although I never declared mission accomplished, we did feel we had tried everything, put in place all the right policies, done sufficient analysis and used every means to reach the goal. But unfortunately that process was interrupted. The evolution of the geopolitical situation and people's actions are obstructing economic development that could have been achieved. That is what I deeply regret. Overall, the good news is economic resilience; the regret is that geopolitical developments serve neither price stability, nor economic growth, nor the innovation and development outcomes all humanity could have shared.'
Lagarde also said the EU and China are each other's high-level trading partners in goods and services, share common interests, and must work together.
Q: Why do you believe the two sides can engage in dialogue? In your view, what does a stable and healthy China-EU relationship mean for the rest of the world?
Lagarde: 'You know, both China and the EU are pragmatic. When China considers its export capacity and expansion, it looks at the world. At the moment, the EU is a very attractive market. The euro area alone has 360 million people, we have a large middle class with strong purchasing power, and we have a high level of goods circulation and trade openness — which is rare among many advanced economies today. So the EU will certainly matter to China. Likewise, many European companies have established operations in China — retail outlets, subsidiaries and manufacturing centers. So there are common interests. The EU and China are high-level trading partners in goods and services. So yes, we must work together.'
