International Monetary Fund chief Christine Lagarde Friday warned the global economy was slowing and said the situation could get worse because Europe was not doing enough to fix its debt crisis.

Lagarde said the IMF would cut its growth forecast in its global outlook to be released later this month.
“What I can tell you is that it will be tilted to the downside and certainly lower than the forecast that was published three months ago,” she told an economic forum in Tokyo during a week-long Asian tour.

“And that is predicated on the right set of actions being taken in Europe in order to avoid very significant
deterioration and to eliminate major threats.”

In April, the IMF hiked its global growth forecasts to an annual rate of 3.5 per cent this year, accelerating to 4.1 per cent in 2013, up from the January forecast of 3.3 per cent and 4.0 per cent respectively.

Lagarde declined to elaborate on the IMF’s new assessment due later this month, but said conditions since the last forecast had “regrettably” become “more worrisome”, although she hailed recent steps to tackle Europe’s woes.

The IMF chief cited measures adopted after a European leaders’ meeting in Brussels last week and the European Central Bank’s move yesterday to cut interest rates to historic lows as proof of progress.

Stimulus measures and emergency aid to troubled Italy and Spain were “significant steps in the right direction”, Lagarde said.

But “from the IMF perspective, we believe that more needs to be done in order to really complete the architectural job of the eurozone: a monetary union, a banking union followed by a fiscal union”. “It’s also a question of implementation -- diligent, rigorous, steady implementation,” Lagarde added