Reining in high debt, reforming financial sectors and lowering unemployment rates are some of the key challenges facing the global economy as it recovers at a slower-than-predicted pace, IMF Managing Director Christine Lagarde said Thursday in Tokyo.
Ahead of a plenary meeting of the International Monetary Fund and the World Bank on Friday, Lagarde urged major industrialized and developing nations alike to make tangible progress in bolstering their economies.
“We expect action,” she said, warning that although progress has been made toward resolving Europe’s sovereign debt crisis, “more needs to happen — and faster.”
In the latest update of its World Economic Outlook, the IMF on Tuesday cut projected global growth this year to 3.3 percent from the 3.5 percent it forecast in July. The organization also reduced its growth prediction for 2013 to 3.6 percent from 3.9 percent.
The downgrade was prompted by the gradual spread of the economic slowdown in developed countries to other parts of the world, resulting in “ripple effects on emerging economies, particularly in Asia,” Lagarde warned.
Regarding Japan, the IMF chief said recovery work in areas shattered by the March 2011 disasters has progressed “at a significant rate,” and praised what she termed the country’s impressive handling of its energy policy shift following the meltdowns at the Fukushima No. 1 plant.
But on Japan’s economy, which the World Economic Outlook estimated will fall to 1.2 percent in 2013 from 2.2 percent this year, Lagarde delivered a somber assessment, saying growth in other parts of the world will inevitably have an impact on its export-driven industries.
Lagarde refused to be drawn into the Senkakus flareup between Tokyo and Beijing, only expressing hope that the issue will be “resolved smoothly” so that trade between the world’s second- and third-largest economies can return to normal.
“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 so that economic cooperation can continue.”
Noting the absence of China’s finance minister and the head of its central bank from the IMF and World Bank meetings, in apparent retaliation over Japan’s nationalization of the Senkakus in mid-September, Lagarde said it represents a loss for Beijing as well.
“They will be missing a great meeting” that will discuss extremely substantial issues, she said of the absent Chinese officials.
World Bank President Jim Yong Kim also held a briefing Thursday in Tokyo before attending his first annual plenary meeting in his new post. Kim was appointed president in July.
“We are in challenging times,” he said, touching on slow growth in both developed and developing countries, rising food prices and the uncertainties surrounding the world economy.
“Our job at the World Bank Group now is to make sure the growth over the last five years that we’ve seen in developing countries in Africa . . . Latin America and Asia is not destroyed by further worsening” in the economic climate, Kim said.
On collaborating with Japan, Kim said it “has shared its knowledge and experience with the rest of the world as it evolved from a developing to a developed country.”
The World Bank will continue to work jointly with Tokyo on key global issues, including health care reforms and disaster prevention and response, Kim added.