IMF chief: Global economy under 'veil of uncertainty'
October 11, 2012 -- Updated 1019 GMT (1819 HKT)
- IMF chief: Global economy needs "action to lift the veil of uncertainty"
- Eurozone woes, weak U.S. growth and a slowing Chinese economy add to uncertainty
- Lagarde: The global banking system is "on the road to being safer, but not yet safer"
- "What is the strategy of the U.S. when it comes to its debt? The world does not know"
(CNN) -- The global economy is under a "veil of uncertainty" as economic issues grip the U.S., eurozone and developing markets such as China, the head of the International Monetary Fund said Thursday in Japan.
Christine Lagarde, the managing director of the IMF, said that while "more difficult to analyze and pin down," elevated levels of uncertainty are resulting in slower growth. "We need action to lift the veil of uncertainty."
Moreover, the world banking system is still in danger four years after the bankruptcy of Lehman Brothers helped catalyze the 2008-2009 financial crisis and still haunted by an unregulated "shadow banking system" of hedge funds and non-regulated derivatives trading.
The global financial system is "on the road to being safer, but not yet safer," Lagarde said in an interview with CNN on the sidelines of the IMF meetings being held this week in Tokyo. "I think it's attributable to the fact that (the banking system) was so damaged to begin with -- it was such a massive shock to financial institutions that it actually took a while to measure the depth of the difficulty and the scope of the changes that have to take place.
Lagarde: U.S. fiscal cliff a concern
More: IMF: Risks to global stability rise
Chinese official leaves IMF meeting
IMF cuts global growth forecast
IMF economist on global risks
"Added to which you have this shadow banking system that is nicely developing around the highly regulated sector -- so that's clearly an area where regulatory supervisors will have do their job," Lagarde added. "I'm concerned because if you look at derivatives, there's a lot we don't know, there's a lot that's not transparent, and that supervisors should know about."
The IMF downgraded its 2012 forecast to 3.3% global growth -- with 1.3% growth predicted for advanced economies and 5.3% in the emerging economies - earlier this week. What is different about this global deceleration, Lagarde said, was that "this is not only affecting advanced economies ... it's also having a ripple effect among developing economies, especially Asia."
During the 2008-2009 financial crisis, developing economies like China led the rest of the world to a return to growth. But the growth was at an anemic pace for the developed world, characterized by high unemployment in the U.S. and the sovereign debt crisis in Europe, which threatened the fabric of the 17-nation bloc united under the euro currency.
While recent moves by central banks -- like last month's unveiling of a bond-buying program by the European Central Bank to ease eurozone crisis concerns -- "creates momentum" for a recovery, "courageous, cooperative measures" are required to eliminate systematic risks to the financial system, Lagarde said.
U.S. debt and "fiscal cliff" -- a January deadline $7 trillion worth of tax increases and spending cuts -- is also creating uncertainty. "What is the strategy of the United States when it comes to its debt, when it comes to its deficit? The world doesn't know and the world wants to know," Lagarde said.
Meanwhile, the regional territorial dispute between China and Japan -- which resulted in several key Chinese finance officials bowing out of the IMF meetings -- adds to the economic insecurity, Lagarde said.
"Any uncertainty, anywhere in the world hurts. To the extent that you have geopolitical uncertainty -- it hurts. And if it's in that part of the world where there actually is growth? It hurts."
More: China's top banker snubs IMF meeting
CNN's Andrew Stevens contributed to this report
Today's five most popular stories
Part of complete coverage on
August 27, 2013 -- Updated 1943 GMT (0343 HKT)
German Finance Minister Wolfgang Schaeuble says the eurozone's problems are not solved, but "we are in a much better shape than we used to be some years ago."
September 4, 2013 -- Updated 1528 GMT (2328 HKT)
The G20 is held in Russia but, amid disagreements over Syria, can anything be done? John Defterios investigates.
July 10, 2013 -- Updated 1502 GMT (2302 HKT)
Summer could not have come soon enough for Lloret de Mar, a tourist resort north of Barcelona. Despite the country's troubles, it's partying.
June 7, 2013 -- Updated 1750 GMT (0150 HKT)
The euro club has suffered major shockwaves but its newest member has emerged as an economic star. What;s behind Estonia's success?
May 29, 2013 -- Updated 1323 GMT (2123 HKT)
The global recovery has two speeds: That of the stimulus-fed U.S. and that of the austerity-starved eurozone, according to a new report.
May 14, 2013 -- Updated 1326 GMT (2126 HKT)
The "rich man's club" of Europe faces economic decay as it struggles to absorb Europe's "poor people", according to economic experts.
May 27, 2013 -- Updated 0256 GMT (1056 HKT)
Europe's competitiveness is threatened as manufacturing companies scrambling to find enough skilled engineers.
July 10, 2013 -- Updated 1502 GMT (2302 HKT)
Spain's economic crisis is in its sixth straight year yet tourism, worth 11% of GDP, is holding its own, one of the few bright spots on a bleak horizon.
May 2, 2013 -- Updated 1044 GMT (1844 HKT)
As European financial markets close for the spring celebration of May Day, protesters across Europe and beyond have taken to the streets to demonstrate.
April 26, 2013 -- Updated 1210 GMT (2010 HKT)
As Croatia prepares to enter the 27-nation European Union, the country's Prime Minister says Italy must return to being the "powerhouse of Europe."
April 25, 2013 -- Updated 1656 GMT (0056 HKT)
Spain's unemployment rate rose to a record high of 27.2% in the first quarter of 2013, the Spanish National Institute of Statistics said Thursday.
March 25, 2013 -- Updated 1355 GMT (2155 HKT)
The financial uncertainty in Cyprus is generating images of long lines at ATM machines and anti-European Union protests.
March 25, 2013 -- Updated 1815 GMT (0215 HKT)
Cyprus will "step up efforts in areas of fiscal consolidation." Where have we heard that before? Oh yes. Greece.
March 23, 2013 -- Updated 0139 GMT (0939 HKT)
The Cyprus debt crisis is being felt by the banks but also by the people who work at them. Nick Paton Walsh reports.
March 22, 2013 -- Updated 0010 GMT (0810 HKT)
CNN's Nick Paton Walsh reports on a Russian hotel maid caught up in Cyprus' financial crisis.
March 18, 2013 -- Updated 1608 GMT (0008 HKT)
Never underestimate the capacity of the Eurozone to shoot itself in both feet, says CNN's Richard Quest.
February 21, 2013 -- Updated 1603 GMT (0003 HKT)
Spain has seen hundreds of protests since the "Indignados" movement erupted in 2011, marches and sit-ins are now common sights in the capital.