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IMF Chief: World Economy at a 'Very Dangerous Juncture'

Wednesday, 21 Dec 2011 07:07 AM

 

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IMF Chief Christine Lagarde warned that the world economy is at a "very dangerous juncture," speaking of the potential impact on poorer nations during her first visit to Africa as head of the fund.

The International Monetary Fund managing director spoke of a crisis of confidence with high unemployment and slowing global growth.

"Currently the world economy stands at a very dangerous juncture," Lagarde told a roundtable Tuesday on Africa's economic future in the Nigerian city of Lagos.
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She said the IMF's revised global growth forecast expected in January looked to be lower than the previous one in September, which was four percent, already down from June's outlook.

"And what's more, there are downside risks on the horizon that are really threatening the recovery process that had started" after the 2008-09 global financial crisis, she said.

The IMF has said Europe's worsening economy and financial market turmoil meant it will revise downwards its predictions for global growth contained in its World Economic Outlook report published three months ago.

Early this month, the UN cut its 2012 world growth forecast to 2.6 percent from 3.6 percent, warning that the global economy is "teetering on the brink of a major downturn."

Lagarde said on Monday during meetings with Nigerian officials that the European debt crisis posed a risk for "all economies of the world."

The eurozone debt crisis eased slightly Tuesday with an agreement on extra funds for the IMF, strong data from Germany and a good bond sale in Spain which boosted stocks and the euro.

The IMF also said Tuesday that bailed-out Ireland was on track to complete its budget turnaround after the fund completed a fourth review.

But the broader deal on funds for the IMF — aimed at allowing the crisis lender to come to the aid of European nations caught up in the debt crisis — fell short of targets, with Britain again out of line with its EU neighbors.

Lagarde did not comment directly on the new pledges of funds from European nations for the IMF, nor did she respond to a question on Britain's stance on the issue.

She said during the roundtable in Lagos that European leaders "have made some very strong decisions" but added later that "it's going to boil down to implementation."

Lagarde spoke of the impact on trade and finance, among other areas, that could cause trouble across the globe, and called on wealthy nations to enact policies that would send clear positive signals to investors and consumers.

"Those problems seem a world away but they are not a world away because what we see very clearly is channels of contagion between those advanced economies and the rest of the world," she told the audience in Nigeria.

She earlier held talks with Nigerian President Goodluck Jonathan after meeting Finance Minister Ngozi Okonjo-Iweala, a respected former World Bank managing director who also participated in Tuesday's roundtable.

Nigeria has long been held back by corruption and mismanagement despite its vast oil wealth.

Most of its population lives on less than $2 per day and electricity blackouts occur daily, while the country's mainly Muslim north has been hit by scores of deadly attacks attributed to Islamist group Boko Haram.

The government is seeking to enact reforms, including a deeply controversial measure which would lead to an increase in petrol prices, to allow the country to invest more in its badly neglected infrastructure.

Lagarde later left Nigeria, Africa's most populous nation and largest oil producer, and travelled to neighboring Niger, one of the world's poorest countries and heavily dependent on trade with Europe, particularly France.

On Wednesday she was due to meet President Mahamadou Issoufou and deliver a speech on economic challenges amid the global uncertainty before the National Assembly.

Lagarde is also expected to visit South Africa, the economic powerhouse of sub-Saharan Africa, in the coming weeks.

© AFP 2014

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