World and Nation

International Monetary Fund sees economic deterioration ahead

WASHINGTON — Christine Lagarde, the managing director of the International Monetary Fund, on Monday warned that the institution would probably cut its estimates of global growth yet again this year because of the tepid U.S. recovery, a slowdown in emerging economies and continued troubles in the eurozone.

Still, she praised the world’s central banks for taking decisive action to ease financial conditions and aid the global recovery in recent months.

“It may well be that central banks will have played and will be recognized to have played a significant role in pulling the global economy out of this great recession,” Lagarde said in remarks prepared for a meeting at the Peterson Institute for International Economics, a Washington-based research group. “But we should not get ahead of ourselves.”

Lagarde said the fund would most likely trim its growth estimates in a periodic update to its economic forecasts, to be delivered at a joint meeting of the World Bank and the IMF in Tokyo next month. In its last estimate, made in July, the fund forecast global economic growth of 3.5 percent in 2012 and 3.9 percent in 2013. The global economy grew about four percent in 2011.

“Clearly, downside risks continue to loom large, importantly reflecting risks of delayed or insufficient policy action,” the fund said in its last estimate.

Lagarde warned that uncertainty continued to plague the global economy, depressing growth in both high- and low-income countries. She repeated her often-delivered message that European policymakers still have much work to do to forge a banking union and ease credit conditions in countries like Spain.

She also delivered a stark warning to U.S. political leaders about the uncertainty over the so-called fiscal cliff, a spate of tax hikes and spending cuts that some economists say are large enough to throw the economy into recession next year.

“It’s not a threat just for the United States of America, it’s a threat for the global economy,” Lagarde said. “We all hope that despite political calendars, which anywhere in the world entail a degree of uncertainty and unpredictability, there will soon be enough political clarity and no political games in order to actually focus on removing this uncertainty and making sure that both the issue of the fiscal cliff and the issue of the debt ceiling are addressed rapidly.”