IMF Chief, Christine Lagarde is in Beijing for the forum, and she had some words of warning: the global economy faces the risk of little or no growth due to financial instability. She also said that Asian economies should take steps to guard against the impact of a downturn.
IMF head Christine Lagarde says the global economy is in a dangerous and uncertain phase, and it’s up to the world’s most developed economies to shoulder the burden of restoring growth and confidence.
She said: "Adverse feedback loops between the real economy and the financial sector have become permanent, and unemployment, as I have just mentioned in relation to the United States of America because it is unusual, has really advanced significantly unabated and remains unacceptably high."
Speaking at a forum in Beijing, Lagarde adds European plans to bolster Greek rescue efforts are a step in the right direction to resolving the euro zone debt crisis, particularly its rescue fund.
Lagarde said: "And I’m very pleased to see that the Europeans have decided to accelerate the work and to make sure that all the guidelines and all the terms and conditions applicable to the leveraging effect that they have conceded will be in place before the end of November so that the fund is actually operational, and I suppose, be raising funds as of December."
Lagarde points out China will have a role to play as well, by reducing its reliance on exports, boosting domestic consumption and currency reform.
She said: "Reform of the financial system continues to be important, and as we’ve said before, China also needs a stronger currency in real effective terms. But there is progress on that front as well."
Lagarde says Asian policymakers will also need to respond quickly, by easing off on fiscal policy when necessary, drawing on reserves, or reactivating regional reserve pooling arrangements, during emergencies.