Do not relax, IMF chief tells world leaders

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SummarySpeaking at a session on the global economic outlook, she said central banks across the world have taken some tough decisions in the recent past and some political leaders are also doing their part on recovery process.

In order to keep up the recovery momentum in the world economy, International Monetary Fund chief Christine Lagarde on Saturday asked countries and their leaders to follow the ‘do not relax’ principle and not let complacency come into their efforts.

“I will pursue with ‘do not relax’ principle. The forecast is for a very fragile recovery in 2013 and that is why I will emphasise on do not relax,” Lagarde said here at the World Economic Forum (WEF) Annual Meeting.

Speaking at a session on the global economic outlook, she said central banks across the world have taken some tough decisions in the recent past and some political leaders are also doing their part on recovery process.

“Some difficult decisions are still due in the US and Europe. The competitiveness of euro zone has to be there,” she said, adding that growth has certainly picked up in the United States.

“For emerging economies, particularly China, re-balancing the business model towards more domestic and more consumption-oriented and less export-focused is going to be there,” the IMF Managing Director said.

Yi Gang, Deputy Governor of People’s Bank of China, said that after seven quarters of slow expansion, his country’s growth rate went up in the last quarter. “China is looking forward to a growth rate of 8 per cent, which is also the IMF growth forecast,” he added.

The panelists noted that the recovery process has only began and was far from over.

Angel Gurria, Secretary General of OECD, said that it was wrong to feel relieved just because the crisis has been overcome.

“What are we relieved about? Are we relieved about exhausting our monetary measures and all other measures. In fact, we should be worried about the current scenario when we have exhausted all our tools. There are issues concerning education, jobs, women, infrastructure building etc, which need to be tackled,” he said.

Disagreeing with OECD’s Gurria, Mark J Carney, Governor of the Bank of Canada, said the monetary policy options have not maxed out and the available options continue to be there before central banks in all major economies.

Asked about steps being taken by countries, Lagarde said: “We at IMF do believe that there has to be some degree of fiscal consolidation in advanced economies. We also believe that the fiscal consolidation has to be at a right pace, adding that austerity measures in Europe were necessary and the situation was indeed very fragile.

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