Global growth likely to be weaker than thought, IMF's Lagarde says
2012-09-25 11:49:49
The International Monetary Fund continues to forecast a gradual recovery for the global economy, but the pace of growth is likely to be weaker than projected earlier, weighed down by risks and policy uncertainty, IMF Managing Director Christine Lagarde said Monday.
"Global growth will likely be a bit weaker than anticipated even in July," Lagarde said during a speech at Peterson Institute for International Economics in Washington.
In its most recent edition of the World Economic Outlook released in July, the IMF projected the global economic growth at 3.5 percent in 2012 and 3.9 percent in 2013. The Fund is expected to unveil its new forecasts on October 9. Lagarde warned that the global economy is still fraught with risks and policy uncertainty is weighing growth down. "This time, we need a sustained rebound, not a bounce," she said ahead of the joint Annual Meetings of the IMF and World Bank Boards of Governors in Tokyo.
The European Central Bank's bond-purchase program, third quantitative easing by the U.S. Federal Reserve and the Bank of Japan's expanded Asset Purchase Program were "big policy signals in the right direction," she said while urging policymakers to make use of the window of opportunity offered by these policy decisions.
"Europe obviously remains the epicenter of the crisis and where the most urgent action is needed," Lagarde said. She called on European policymakers to deliver on their commitments, including by establishing a single supervisory banking mechanism and enabling the direct recapitalization of banks.
On Greece, Lagarde said a worsening economic outlook, major delays in a privatization program and limited revenue collection have created a "financing gap." The Greek debt "will have to be addressed as part of the equation," the managing director added.
According to her, another major risk to the global economy is in the U.S. Lagarde called for action to avoid this so-called "fiscal cliff" and a concrete plan to bring down debt gradually over the medium term. She urged major emerging markets to focus on countering vulnerabilities, whether domestic or external. The Fund is pushing to pass significant reforms, aimed at giving greater representation to emerging market and developing economies, "if not by October, then as soon as possible thereafter," Lagarde said.