Newspaper article International Herald Tribune

I.M.F. May Scale Back Its Forecast for Growth ; Praising Central Banks, Lagarde Also Cites Peril of American 'Fiscal Cliff'

Newspaper article International Herald Tribune

I.M.F. May Scale Back Its Forecast for Growth ; Praising Central Banks, Lagarde Also Cites Peril of American 'Fiscal Cliff'

Article excerpt

Nevertheless, Christine Lagarde, the fund's managing director, praised the world's central banks for taking decisive action to aid the global recovery in recent months.

Christine Lagarde, the managing director of the International Monetary Fund, warned Monday that the institution would probably cut its estimates of global growth again this year because of the tepid recovery in the United States, a slowdown in emerging economies and continued troubles in the euro zone.

Still, she praised the world's central banks for taking decisive action to ease fraught financial conditions and aid the global recovery in recent months.

"It may well be that central banks will have played a significant role in pulling the global economy out of this Great Recession," Ms. Lagarde said in remarks prepared for a meeting at the Peter G. Peterson Institute for International Economics, a research group based in Washington. "But we should not get ahead of ourselves."

Ms. Lagarde said it was "likely" that the fund would trim its growth estimates in a periodic update to its economic forecasts to be delivered at a joint meeting of the World Bank and the I.M.F. in Tokyo next month.

In its last estimate, made in July, the fund foresaw global economic growth of 3.5 percent in 2012 and 3.9 percent in 2013. The global economy grew about 4 percent in 2011.

"Clearly, downside risks continue to loom large, importantly reflecting risks of delayed or insufficient policy action," the fund said in its last estimate.

Ms. Lagarde warned that "uncertainty" continued to plague the global economy, depressing growth in both high- and low-income countries. She repeated her often-delivered message that European policy makers still had much work to do to forge a banking union and ease credit conditions in countries like Spain.

She also delivered a stark warning to American political leaders about the uncertainty over a spate of tax hikes and spending cuts that are set to take effect next year unless Congress acts to change them. …

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