“We continue to project a gradual recovery, but global growth will likely be a bit weaker than we had anticipated even in July, and our forecast has trended downward over the last 12 months,” IMF managing director Christine Lagarde said in a speech previewing meetings in Tokyo on 12-14 October.
The biggest factor weighing on the world economy was uncertainty among investors over whether policymakers in advanced economies will deliver on promises, Lagarde added.
In July, the IMF cut its global growth projection for 2013 to 3.9 per cent but left its 2012 forecast unchanged at 3.5 per cent.
Lagarde said uncertainty over the Eurozone was the greatest risk to the world economy, but the possibility of a so-called fiscal cliff of expiring tax cuts and automatic government spending reductions next year in the US was a also a “serious” risk.
She again called on Europe to move towards a banking union. “We continue to believe it should be initiated as soon as possible,” she said.