Global economy still fraught with uncertainty

The global economy is still fraught with uncertainty and still far from where it needs to be, Christine Lagarde, managing director of the International Monetary Fund (IMF), said here on Monday. "We continue to project a gradual recovery, but global growth will likely be a bit weaker than we had anticipated even in July, and our forecast has trended downward over the last 12 months," Lagarde said at a luncheon event hosted by the Peterson Institute for International Economics, a Washington-based think tank. "A number of factors are weighing the global economy down. At the center of them all is the element of uncertainty; uncertainty about whether policymakers can and will deliver on their promises, " she noted. The global economic growth was confronted with a number of challenges including the ongoing eurozone debt crisis, a tepid recovery in the United States, the economic slowdown in emerging markets, and great concerns in low-income countries about rising food prices and volatile commodity prices, added the IMF chief. The global economic recovery hinges on delivering on the policy commitments that have been made, she stressed. "We need certainty, not uncertainty. We need decision-makers to be real action-takers. We need delivery," she said prior to the annual meetings of the IMF and its sister agency the World Bank, to be held in Japan next month. Europe obviously remains the epicenter of the crisis and where the most urgent action is needed. A strong and effective banking union should be initiated as soon as possible to break the vicious cycle between banks and sovereigns, Lagarde said. In the United States, the immediate concern is the "fiscal cliff" triggered by a dramatic tightening of the deficit next year which would reduce U.S. economic growth by as much as 2 percent, she warned. Major emerging economies are seeing slower growth paces, so they must follow through on the actions needed toposition themselves as the global growth leaders of the future and address domestic or external vulnerabilities, she added.