IMF Set to Lower Global Growth Outlook

by CFO Innovation Asia Staff, 09 July 2012

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Finance and Banking

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economic outlook GDP global growth International Monetary Fund

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The International Monetary Fund warns that its growth forecast for the global economy is expected to be lower than anticipated.

The head of the IMF, Christine Lagarde, says that over the past few months, the outlook for the global economy had become increasingly worrying. There are signs that activity is slowing across both advanced and emerging market economies.

During a keynote speech in Tokyo—the first stop in a three-country trip to Asia—the IMF Managing Director said in today’s interconnected world, countries could not afford to look only at events within national borders.

The global community must work together to meet the challenges thrown up by the global financial crisis and to ensure future stability and growth, says Lagrde.

“This crisis does not recognise borders. This crisis is knocking at all our doors,” says Lagarde. “This is a global crisis.”

Lagarde acknowledged that major steps had been taken to stabilise the European debt crisis, but warned that without continued, decisive measures, the damaging effect on stability and growth would be felt not just in Europe, but worldwide.

To address the common threats facing the global economy, “solutions need to be grounded in cooperation,” says Lagarde.

IMF research suggests that a coordinated strengthening of policies across the Group of 20 leading economies (G-20) could raise global GDP by 7 percent and boost jobs by 36 million over the medium term.

Lagarde identified major areas which needed addressing to “break the main chains of this crisis: weak sovereigns, weak banks, and weak growth.” By weak sovereigns, Lagarde was referring to the weak fiscal positions and high national debt of some advanced economies.

She said countries must deal decisively with the issue of public debt, as well as restoring the health of the financial sector. But in addition, there needed to be structural reforms, whether in labor, service, or product market reforms.

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