IMF Chief Pessimistic on Global Economy

Christine Lagarde warned Friday that the International Monetary Fund, of which she is the Managing Director, will lower its forecast for global economic growth in its next assessment of global economic conditions, due next week. “In the IMF’s updated assessment of the world economy, to be released 10 days from now, the global growth outlook will be somewhat less than we anticipated just three months ago. And even that lower projection will depend on the right policy actions being taken,” Lagarde said in a speech.

Perhaps making Lagarde’s statements even more alarming is that they were made before the US Labor Department issued a disappointing report on US job growth in June, a report that sparked substantial losses in all three major US stock indexes. The report showed that the US economy added just 80,000 jobs last month, following May’s gain of 77,000, while the unemployment rate remained at 8.2 percent. Economists commonly say that US job growth needs to be about 125,000 just to account for natural additions to the work force through population growth.

Earlier last week, European and Chinese officials acknowledged the slowing global economic situation by easing monetary policy as China, the world’s second-largest economy behind the US, prepares for a series of economic reports due next week, including a reading on second-quarter GDP growth. The IMF, meanwhile, will issue its latest World Economic Outlook report on July 16th. Lagarde, who delivered the comments at a conference in Japan, applauded the growing sense of cooperation among European powers aimed at containing the sovereign debt crisis, but acknowledged that further cooperation may be necessary.