Global Recovery, Growth Hampered by Uncertainty–Lagarde

Uncertainty hampering decisions to invest, create jobs

Central banks’ recent strong policy signals create opportunity for policy action

IMF chief calls for courageous, cooperative action to secure recovery

She told reporters at a news conference ahead of the 2012 IMF-World Bank Annual Meetings in Tokyo that many of the right decisions had been taken to secure global recovery, but added that these decisions need to be implemented.

“We need action to lift the veil of uncertainty. Many of us have debated what actions are needed, many of us understand what needs to be done, but it actually needs to happen,” Lagarde said.

“What is most needed is cooperation. The task of securing sustained recovery has become more complex: it involves multiple players, and they are all playing a single game.” Lagarde noted that the world economy is seeing the emergence of new players, as traditional actors take on different roles.

“We really need to go through what needs to be done to make sure that recovery is not just a little bounce but is really here for the longer term and is sustainable’” she said.

Ripple effects

Lagarde noted that the IMF had lowered its forecasts for world economic growth. The biggest change had been development of much larger global ripple effects that spread the slowdown to emerging markets, particularly those in Asia.

Lagarde was speaking to reporters after the IMF’s World Economic Outlook set out a gloomier picture for the global economy than a few months ago, saying prospects have deteriorated further and risks increased. The IMF’s Fiscal Monitor said that in many advanced economies, efforts to reduce debts and deficits will need to persist for many years for debt ratios to return to their pre-crisis levels. And the Global Financial Stability Report said mounting risks and concerns about the euro area are fueling financial instability.

Lagarde said one of the causes of slow global recovery was the degree of uncertainty in many parts of the world. “There is a level of uncertainty which is hampering decision makers from investing and from creating jobs.”

Opportunity for action

Some players had decided to act, however, and this was good news, Lagarde stated. Central banks had given good, strong policy signals lately. “That creates momentum that should be seized as an opportunity, because in and of itself it will not be sufficient.”

“My message today: countries need to take courageous and cooperative action to spur a lasting...