The fog of uncertainty that looms over the European and global economies are likely to slow the speed of the global recovery, managing director of the International Monetary Fund Christine Lagarde said.
Although she praised actions made by the European Central Bank, growth will still come at a very slow, incremental pace; Lagarde said:
“At the center of them we clearly see uncertainty — uncertainty about what policymakers can and will deliver on their promises.”
In July, the IMF predicted world growth just below four percent for 2013. A new forecast will be issued in a few weeks from the group’s economist. A few tenths of a percentage points are expected to be cut from the global growth prediction, NPRreports.
While speaking at the Peterson Institute for International Economics in Washington, D.C., Lagarde applauded Central bankers, who have played a crucial role, she said. The Central banks of the United States, Japan, and the European Union have in recent weeks announced new programs which will add hundreds of billions of dollars to their weakened economies.
Lagarde believes policy signals are being sent in the right direction:
“They point the way forward and they create an opportunity to build on what has already been done, an opportunity to make a decisive turn in the crisis.”
In particular, Lagarde focused on the Eurpoean Central Bank’s boundless bond buying program, which was announced earlier this month and projected to be a changing point in the euro crisis.
Borrowing costs are designed to be lower for countries like Italy and Spain. The announcement greatly helped to calm financial markets and greatly brought down borrowing costs.
A great source of anxiety is from the fiscal cliff where policy makers in the US have left questions about massive tax and spending on January 1 unanswered. Lagarde hopes clarity will come soon; otherwise, the consequences could be drastic and felt around the world.