IMF chief Christine Lagarde warns some risks to global economy persist

Lagarde cites 'patchy' global recovery with concerns 'naturallycentring on Europe'

PUBLISHED : Monday, 08 April, 2013, 12:00am
UPDATED : Monday, 08 April, 2013, 6:18am

International Monetary Fund managing director Christine Lagarde said that while a "substantial portion" of the global economy appears better now than a year ago, some risks persist.

"Growth continues to strengthen and broaden among the emerging and developing economies", and momentum was starting to pick up in the United States, Lagarde said yesterday at the Boao Forum for Asia in Hainan province.

Without providing numbers, Lagarde said she was giving a preview of the IMF's World Economic Outlook report, which is due to be released this week.

Risks included a "patchy recovery", with concerns that "naturally centre on Europe", according to Lagarde.

"While there has been progress on a number of fronts, policy solutions will take time to be completed and [become] effective," she said.

Fiscal risks were also weighing on growth, she said, citing spending cuts in the US and a "medium-term challenge" in Japan.

Monetary policies have limits in their effectiveness and may include unintended consequences, Lagarde said, while praising last week's expanded stimulus package from the Bank of Japan as "another welcome step in this direction".

After decades of lending to developing economies in crisis, the IMF is now co-funding bailouts for Greece, Portugal and Ireland to help the euro zone exit its debt turmoil.

Lagarde said in response to questions after her speech yesterday that Cyprus was "certainly no template of how things of that nature should be resolved".

Cyprus was special, in part because of the size of the banking industry there compared with the country's economy, the IMF chief said.

The euro currency "has a future, and has a long-standing one", Lagarde insisted.

"The collective political will to maintain, defend, protect and enhance the [European] monetary and currency zone has been largely underestimated," she added.