IMF calls for decisive action against risks to world economy

World finance ministers on Saturday warned that downside risks to global growth remain and called for quick and effective action to rebuild shaken confidence.

“Global growth has decelerated and substantial uncertainties and downside risks remain. Key policy steps have been announced, but effective and timely implementation is critical to rebuild confidence,” the ministers said at the end of an annual meeting of the International Monetary Fund.

“We need to act decisively to break negative feedback loops and restore the global economy to a path of strong, sustainable and balanced growth,” they added.

The International Monetrary and Financial Committe (IMFC),  the policy-setting arm of the International Monetary Fund, discussed the slowing global economic recovery and the sovereign debt crisis in Europe.

The IMFC, chaired by Tharman Shanmugaratnam, Finance Minister of Singapore, asked the European leaders to steadily implement measures they have agreed on so as to address financial market concerns regarding fiscal and banking problems in some euro zone countries. It said advanced economies should deliver the necessary structural reforms and implement credible fiscal plans.

“Emerging market economies should preserve or use policy flexibility as appropriate to facilitate a response to adverse shocks and support growth.”  The committee said economic activity is slowing in emerging market and developing economies, reflecting weaker external and domestic demand and, in some cases, policy tightening to address inflationary pressures.

“Risks are compounded for some countries by falling prices for non-food commodities and upward price pressures on some food items.”

These economies, the ministers said, will need to ensure flexibility in policy implementation to support growth, consistent with global rebalancing.
“The potential impact from large and volatile cross-border capital flows should be closely monitored.”

On “Global Policy Agenda”, the commitee reaffirmed commitment to avoid any form of trade and investment protectionism.

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