Post date: Mar 18, 2012 1:19:41 PM
The International Monetary Fund says high debt levels in developed markets and rising oil prices are key risks ahead as the global economy steps back from the brink of danger.
BEIJING, CHINA (MARCH 18, 2012) (CCTV) - The global economy has stepped back from the brink of danger and signs of stabilisation are emerging from the euro zone and the United States, but high debt levels in developed markets and rising oil prices are key risks ahead, the International Monetary Fund (IMF) chief said on Sunday (March 18).
"And I did say that we were in a danger zone, and that's what the IMF thought. The signs that we are seeing at the moment are a little bit better. What we are seeing coming out of Europe at last, what we are seeing coming out of the United States of America is a little bit better than what it was only six months ago," said the IMF Managing Director Christine Lagarde in a speech in Beijing.
She said signs of stabilisation were emerging to show that policy actions taken in the wake of the global financial crisis were paying off, that U.S. economic indicators were looking a little more upbeat and that Europe had taken an important step forward in solving its crisis with the latest efforts on Greece.
However, the IMF chief cited still fragile financial systems burdened by high public and private debt persists advanced economies as the first of three major risks and said euro zone public sector and bank rollover funding needs in 2012 were equivalent total about 23 percent of GDP.
She also pointed out the rising price of oil is becoming a threat to global growth, and there is a growing risk that activity in emerging economies will slow over the medium term.
"So the global economy may be on the path to recovery, but with not a great deal of room for manoeuvre, and certainly no room for policy mistakes," she added.
Lagarde said China had showed leadership and adept policy skills when the global financial crisis exploded and which might have been worse but for the impetus it provided to growth and stability.
She further praised what she said was China's leadership and influence in global institutions such as the IMF and G20 group of the world's 20 biggest economies.
Lagarde said she saw three priorities for China, the first to support growth; second, to shift its drivers of economic growth away from investment and exports towards domestic consumption; and third, to spread wealth more widely.
"But first of all we think that it's important that China can continue to support growth. And on this score, China is in the enviable position of having the space to provide some modest fiscal support for its economy as outlined at the recent National People's Congress. Second, to continue shifting the driver s of economic growth away from investment and exports and towards domestic consumption, China would do a great service to its economy and its people. And third, China could certainly improve the household livelihood, so that China's citizens may all share in the dividends of high and sustained growth," she said.
In a separate talk on the same day, Lagarde said that China's yuan could become a reserve currency in the future, adding that the country needed a roadmap for a stronger, more flexible exchange rate system.