IMF Managing Director Christine Lagarde prepares to host a news conference at the Treasury, in London June 6, 2014.© Paul Hackett / Reuters/Reuters
The global economy needs bold policies to avoid a "new mediocre" period of sluggish growth as the world struggles with a disappointing recovery six years after the financial crisis, the head of the International Monetary Fund said.
"We see continued weakness in the global economy," IMF Managing Director Christine Lagarde said in a speech today at Georgetown University in Washington. "Countries are still dealing with the legacies of the crisis, including high debt burdens and unemployment."
Lagarde cited "some serious clouds on the horizon," including high unemployment and low inflation in the euro area, financial excesses building in advanced economies, and market and liquidity risks that are migrating to less-regulated parts of the financial system.
"The global economy is at an inflection point: it can muddle along with sub-par growth - a 'new mediocre,'" she said in her prepared remarks. "Or it can aim for a better path where bold policies would accelerate growth, increase employment, and achieve a 'new momentum.'"
The world economy is weaker than the IMF projected six months ago, Lagarde said, five days before the IMF releases new global growth forecasts. Advanced-economy growth is led by the U.S. and U.K., Japan's rebound is "modest" while the euro area is the weakest, she said. Emerging markets in Asia and especially China "will continue to help drive global activity," she said.
"Our main job now is to help the global economy shift gears and overcome what has been so far a disappointing recovery: one that is brittle, uneven, and beset by risks," Lagarde said.