IMF's Christine Lagarde says crisis hurting emerging nations

 
Euro sign The eurozone crisis has hurt global economic sentiment and growth

The International Monetary Fund (IMF) head, Christine Lagarde, has warned the global economic crisis has started to hurt growth in emerging economies.

She said that uncertainty surrounding the global economy was hampering policymakers' ability to take measures to boost growth.

Earlier this week, the IMF warned that the global economic recovery was getting weaker.

The fund has also cut its global growth forecast amid the ongoing crisis.

Separately, the World Bank has cut its forecast for major Asian economies, including China and India, citing global risks.

"Whether you turn to Europe, to the United States of America, to other places as well, there is a level of uncertainty that is hampering decision makers from investing, from creating jobs," Ms Lagarde said during a press conference in Tokyo.

"We need action to lift the veil of uncertainty."

Delayed recovery?

One of the key concerns among policymakers across the globe has been the ongoing debt crisis in the eurozone and its impact on global growth.

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The world is still a scary place, but for the Fund - and for governments - scary is becoming all too normal. The more normal it seems, the less scope there may be for the IMF to make much of a difference. ”

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The crisis has dented consumer confidence in the region and hurt growth in the bloc's economies.

That has already had an impact on demand for exports from Asia to the region, hurting growth in export-dependent countries such as China, Japan and South Korea.

Ms Lagarde, who was speaking in Tokyo on the eve of the annual joint meeting of the IMF and the World Bank, said that while eurozone policymakers had taken measures to allay fears about the crisis worsening, a fast recovery was not on the cards.

"Good news is the fact that this European Stability Mechanism that had been discussed and in the making for the last months has now been christened," she said.

"In terms of speed, the bad news is that for it to actually operate there will be a legislative and often parliamentary process for the fund to effectively work."

Closer ties

The meeting is taking place at a time of increased political tensions between Asia's two biggest economies, China and Japan.

Relations between the two have deteriorated in recent weeks after Japan said it had purchased a set of disputed islands in the East China Sea, which are claimed by both the countries as well as Taiwan.

Lagarde: "We hope that differences, however long-standing, can be resolved"

The islands lie in important shipping lanes and fishing grounds and also close to waters thought to contain natural resources.

Japan's announcement of its purchase of the islands in September had sparked a diplomatic row and led to anti-Japan protests in China.

On Wednesday, the governor of China's central bank pulled out of the IMF and World Bank meetings.

The country's finance minister is also unlikely to go, as state media said that Vice-Minister Zhu Guangyao would attend.

Ms Lagarde called upon the two nations to resolve their differences.

"All economic players and partners in this region are very critical for the global economy," she said.

"We hope that differences, however long-standing, can be resolved harmoniously and expeditiously so that from an economic point of view the co-operation can continue and can be beneficial not only to those countries... but also to the global economy."

 

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  • rate this
    +6

    Comment number 107.

    What nearly everyone over looks is, thanks to technology, the globalisation of the economy. Britain needs to compete with the vast resources of countries like China and India who also have nothing like the workers "rights" of the west. We have grown FAT on a debt fuelled boom which cannot be sustained and therefore we will face years of austerity. I fear our governments will be powerless.

  • rate this
    +20

    Comment number 47.

    Bottom line here is that growth in developed economies is effectively over.Developing nations will follow shortly.Economics as a discipline has only existed in the last 200 years during fossil fuel enabled times of exponential growth.This is not sustainable and so neither is ever rising GDP, population, globalisation and consumerism.Leaders like Legarde need to wake up to reality and do the maths.

  • rate this
    +6

    Comment number 46.

    "She said that uncertainty surrounding the global economy was hampering policymakers' ability to take measures to boost growth."

    Surely this is what policy makers are paid for. If it was easy wouldn't anyone be able to do it?

    The current climate is not just hard for 'Policymakers' in their ivory towers and million pound houses, it's hard for everyone!!!

  • rate this
    +6

    Comment number 40.

    Simple answer.. Debt is causing the problem. It needs paying off. That means harsh decisions including cutting aid budgets,welfare benefits, public sector costs, war spending, earnings expectations etc in all nations of the "developed" world. And these debt levels must never happen again !
    If we don't then this crisis will go on for the next decade..or two..or three..!!

  • rate this
    +7

    Comment number 4.

    This crisis has a long way to run. There appears to be a sense of desperation in the expectation that policy makers and central banks can solve the problems. The eurozone will not get its act together and there is a fiscal crisis in the USA drawing ever closer.
    Growth will be too weak to avoid these issues so it is hard to see any light at the end of the tunnel.

 

Comments 5 of 6

 

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