The International Monetary Fund is expected to cut its forecasts for global growth when it convenes in October—but not by much, the fund’s managing director Christine Lagarde said on Monday.
“The global growth that we have forecasted twelve months ago, that we have revisited six months ago, is likely to be yet a little bit weaker than we had anticipated,” Lagarde said at a luncheon hosted by the Peterson Institute for International Economics. “So little bit weaker, small decimal points, for sure, but what’s characteristic is that our forecast has trended downward.”
In July, the IMF had predicted that the global economy would grow by 3.5 percent in 2012 and 3.9 percent in 2013, each slightly lower than the fund had forecast in April.
Lagarde also emphasized in her remarks the risks posed by the so-called fiscal cliff the United States faces, a combination of tax hikes and spending cuts that will take place at the beginning of next year if Congress fails to act. The combination would reduce growth by as much as 2 percent, she estimated.
“It’s not a threat just for the United States of America. It’s a threat for the global economy, given the size of the U.S. economy and its linkages with many other countries around the globe,” Lagarde said of the fiscal cliff and the approaching debt ceiling.
Lagarde praised the U.S. Federal Reserve’s decision this month to launch a third round of bond-buying in an attempt to shore up the economy, as well as similar moves by central banks in Europe and Japan.