IMF laments unhealthy '3-speed recovery'

IMF Managing Director Christine Lagarde expressed fresh concern Thursday over the "three-speed recovery" in the world's largest economies as the Fund and the World Bank opened their spring meetings. Lagarde said it was a "critical moment" for the global economy that requires well-calibrated "customized" responses by different economies -- stagnating Europe and Japan, the sluggish United States, and quicker-moving emerging economies -- to get back in sync with each other and strengthen global growth. While the IMF has had to cut its 2013 global growth forecast to 3.3 percent, Lagarde told journalists, "We believe that we have avoided the worst and the economic world no longer looks quite as dangerous as it did." "At the same time, the pickup in financial conditions, financial markets is clearly not translating into a sustained pickup in growth and jobs." That the three groups of countries are moving at distinctly different speeds "is not the healthiest recovery that we could think of." "What we need is a full-speed global economy." The annual IMF and World Bank spring meetings, including finance ministers and central bankers from most of the world's countries, kicked off as slowing growth and potential turbulence from a global flood of liquidity was keeping both developed and developing economies on edge. The attendees from the Group of 20 economic powers will also meet on Thursday and Friday on specific issues, including how to advance an initiative on banking transparency and the sharing of banking information for tax purposes, an effort launched by Washington to give countries the ability to tax a citizens' wealth held offshore. The IMF meetings opened amid stress and frustration that, as the large economies still have not fully returned to growth after the 2008 financial crisis, small economies remained vulnerable to the continued turbulence in the markets. Finger-pointing about excessive austerity and lack of support for demand, unmanageable capital flows stoked by central banks pumping out money, competitive devaluations, excessive sovereign debt and papered-over banking weaknesses were all in the open ahead of the meetings. Much of the pointing was done by the IMF itself, which still in reports released over the past week displayed deep concerns, especially about the continued recession in the eurozone. "Global prospects have improved again, but the road to recovery in the advanced economies will remain bumpy," the IMF said in its World Economic Outlook. "In the medium term, the key risks relate to adjustment fatigue, insufficient institutional reform, and prolonged stagnation in the euro area as well as high fiscal deficits and debt in the United States and Japan. "In this setting, policymakers cannot afford to relax their efforts." Lagarde said policy-makers everywhere still have tools to address their challenges, and noted that the European Central Bank still has room to cut interest rates to spark growth. On the other hand, she acknowledged that, worldwide, central banks have entered "uncharted territory" with their massive monetary stimulus injections. World Bank President Jim Yong Kim meanwhile sought to hold attention to the challenge of poverty alleviation in poorer nations and, as well, the need for more action to battle climate change. Even though developing countries are growing well relative to the advanced economies, accounting now for half of global growth, he said, there is a wide disparity of conditions among them that allows extreme poverty to persist. "I have no doubt that the world can end extreme poverty within a generation," he said. But there is no single solution to the problem. "Now more than ever, solutions need to be found in domestic macroeconomic and structural policies that address the distinct conditions in individual countries." Kim also dismissed worries that a new infrastructure-oriented development bank being launched by the cash-rich BRICS emerging economies led by China would cut into the World Bank's own business. "It's true that the BRICS countries, many of them are extremely well financed and have money, but they continue to come to us for very specific reasons," he said. "There's still no question that the quality of our experience, the quality of our knowledge, our ability to help them actually deliver on their promises to their people is what keeps them coming back to the World Bank Group." "I really have no doubt in my own mind about our continued relevance for a very long time."