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People's Daily Online>>Foreign Affairs

IMF chief cautions against false sense of security

(Xinhua)

08:42, March 19, 2012

BEIJING, March 18 (Xinhua) -- Visiting chief of the International Monetary Fund Christine Lagarde warned Sunday that the global economy may be on a path to recovery, but there is not a great deal of room for maneuver and no room for policy mistakes.

There are still major economic and financial vulnerabilities even though financial market conditions are more comfortable and recent economic indicators begin to look more upbeat, including in the United States, she said at the China Development Forum held Sunday in Beijing.

Decision and policy actions by the European Central Bank and some European countries have helped and that progress was made after renewed support for Greece--from both the IMF and European partners, she said.

On the back of these collective efforts, the world economy has stepped back from the brink and we have cause to be more optimistic, she said.

However, she said optimism must not lull us into a false sense of security. Citing as an example, she said financial systems are still fragile and high public and private debt persists in many advanced economies.

Meanwhile, the rising prices of oil is becoming a threat to global growth, said the IMF chief.

She called on advanced economies to capitalize on the newly gained breathing space and push forward with policies that will enable them to emerge from the crisis that hit the United States and Europe.

"This means continued macroeconomic support and a balanced fiscal approach, together with financial sector reforms and structural and institutional reforms to repair the damage done by the crisis and to improve competitiveness", she said.

She also urged emerging market economies to calibrate macroeconomic policies -- both to guard against further fallout from the advanced economies as well as to keep overheating pressures in check, and continue to invest in such reforms as increasing social transfers or lowering consumption taxes.

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