“I can say that our base case is certainly not a recession,” IMF First Deputy Managing Director John Lipsky told CNBC television. “There’s no doubt however that risks have risen given the weak performance in many economic data in the last few months,” he added.
Lipsky said rising risks to the global economy reflected a lack of confidence in policymakers’ ability to rein in debts.
He urged both the US and Europe to develop credible medium-term fiscal plans to boost confidence in their ability to cut their debt levels.
“It is clear what is needed is credible medium-term fiscal plans that will give confidence to investors and others that the deficit will be controlled and fiscal policy will be appropriate in the medium term,” Lipsky said, speaking from US Federal Reserve’s annual retreat in Jackson Hole, Wyoming.
“The more credible medium term planning, the more flexibility that will exist with temporary impacts, such as potential impact of the hurricane (Irene),” said Lipsky.
He said effective fiscal measures could include a combination of US tax reforms and clear-cut spending plans.
The White House said President Barack Obama and IMF chief Christine Lagarde spoke by phone and agreed that the world economy needs further steps to boost growth in the short term.
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