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IMF issues cautiously upbeat assessment

March 20, 2012

In a cautiously upbeat assessment of the global economy, International Monetary Fund managing director Christine Lagarde said measures to fight financial woes in Europe and the US were starting to pay off, but warned there were still “major” vulnerabilities, with public and private debt still high in many advanced economies, oil prices surging (Brent crude hit an all-time high of $125.81 a barrel last week) and the risk of slowing activity in emerging nations over the medium term.

“The recovery will be a marathon, and not a sprint,” she said at an economic conference in Beijing. “Optimism must not lull us into a false sense of security. The global economy may be on a path to recovery, but there is not a great deal of room for manoeuvre and no room for policy mistakes.” Separately, the IMF head praised China’s efforts to rebalance its economy, stating that the “highest levels” of the nation’s leadership appears to be willing to make the changes needed to ensure that the world’s second-largest economy remains a  ain driver of global growth, and backed – in principle – China’s hope of turning the renminbi (which the IMF has declared undervalued) into a global reserve currency, but also said that China’s slowing economy was a “special concern.” Actual GDP growth in 2012 will likely exceed the conservative government target of 7.5%, but is widely seen as falling below last year’s 9.2%.