By Simon Miller
The outlook for the global economy has become worse according to the head of the International Monetary Fund Christine Lagarde.
Speaking in Tokyo, Lagarde said that over the past few months, the outlook as become “more worrisome” as economic indicators deteriorate.
Foreshadowing the IMF’s update on the world economy which is published in 10 days time, Lagarde said the global growth outlook will be “somewhat less than we anticipated just three months ago”.
She added: “And even that lower projection will depend on the right policy actions being taken.”
Although she praised steps taken to ease European bank funding pressures and the “significant steps” taken to address the immediate crisis, Lagarde added that “further progress will continue to be needed to overcome the crisis decisively and avoid the damaging effects on stability and growth.”
She continued: “In today’s interconnected world, we can no longer afford to look only at what goes on within our national borders. This crisis does not recognize borders. This crisis is knocking at all our doors.
“And there are risks in all corners of the globe - Europe, the United States and, here too, in Asia and Japan.”
Although Lagarde said Asia had coped with the financial crisis, she warned that the spillovers from Europe were increasingly visible through lower stock prices, capital outflows and higher spreads.
She added: “For Japan, two risks are of primary concern: Upward pressure on the yen from the continued flight to safety would be an unwelcome hurdle to Japanese growth.And, with a large share of your exports destined for Europe, a deeper crisis there would take its toll on growth.”