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‘World economy faces downside risks’

‘World economy faces downside risks’

WASHINGTON: Intern­atio­nal Monetary Fund (IMF) chief Christine Lagarde says the world economy is recovering but fragile and “faces some downside risks.”

In an online press conference on Wednesday, Lagarde described the United States “a strong performer” and China “resilient” despite a recent drop in Chinese stock prices.

She also expressed optimism for the 19 countries that use the euro. The IMF expects the eurozone economy to grow 1.5 per cent this year and 1.7pc in 2016; it expanded just 0.8pc in 2014.

“The euro area is beginning to turn the corner ... We have a more upbeat forecast than we have in a long time,” she said.

Lagarde called again for Greece’s creditors to reduce its debt burden. She said Greece needs to enact reforms that will make its economy more efficient and expressed confidence the IMF can work with Greece’s left-wing government, which has criticised IMF policies.

“There are lots of things that you say (in politics),” she said. “What matters at the end of the day is what you do.”

Lagarde noted that a drop in worldwide commodity prices is likely to hurt emerging market economies. And the global economy could face fallout if the Federal Reserve raises short-term US interest rates, which it has kept near zero since late 2008. Fed Chair Janet Yellen has said a rate increase is likely this year. Lagarde has urged the Fed to delay the rate hike until 2016, citing the fragility of the global economic recovery.

On Wednesday, Lagarde acknowledged the Fed and the IMF are “not always exactly on the same page” but said the two institutions have a good working relationship.

The IMF managing director said Japan’s attempts to boost its economy through easy money policies, government spending and economic reforms — an effort called “Abenomics” after Prime Minister Shinzo Abe — “is turning out to be positive, is beginning to deliver.”

Published in Dawn, July 30th, 2015

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