IMF head Christine Lagarde, speaking in Washington, said on Monday: “We continue to project a gradual recovery, but global growth will likely be a bit weaker than we had anticipated even in July, and our forecast has trended downward over the last 12 months.”
In July, global growth rate for 2013 was forecast at 3.9%.
Ms. Lagarde welcomes Eurozone governments’ decision of purchasing unlimited number of bonds from distressed Eurozone countries; however, she regarded the region to be the “epicenter” of the global crisis.
With regards to the US situation, Ms. Lagarde added that the approaching U.S. “fiscal cliff,” and its threat of dramatic government spending cuts, could have global ripple effects, too.
Central-bank policy has been a main prop for developed countries, with the U.S. Federal Reserve and the Bank of Japan announcing rounds of “quantitative easing” to pump money into those economies and the European Central Bank approving plans to ensure that governments can finance their operations.
But that may prove only a temporary salve, Lagarde suggested, without more steps to reignite growth in Europe and address fiscal problems in the United States.