IMF chief warns global economic growth forecasts to be cut

The International Monetary Fund (IMF) is expected to cut its forecast for global economic growth again next month when it announces its updated predictions for the leading global economies at an IMF meeting in Tokyo.

In a speech, the head of the IMF, Christine Lagarde said she expected global growth would “likely be a bit weaker” than previously thought.

In July the IMF left its forecast for global economic growth for 2012 unchanged at 3.5 per cent but cut its projection for 2013 down to 3.9 per cent.

She said that the euro debt crisis and concerns over the US economic deadlock on how to lower debt were mitigating circumstances that are lowering investors’ confidence.

Ms Lagarde also warned that economic activity was slowing down in some of the emerging economies that had helped bolster global growth in the past.

Ms Lagarde, speaking in Washington, said on Monday: "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."

Ms Lagarde said that the European Central Bank’s decision to offer to buy unlimited bonds from countries at the centre of the euro debt crisis was “clearly a turning point,” but, she added Europe remained “the epicentre” of the global economic slowdown.

On The US, Ms Lagarde warned both Republican and Democrat policymakers that they must come to some agreement on how to lower the debt otherwise big spending cuts and huge tax increases will be automatically invoked which could cause great damage to the global economy.