Lagarde said on Thursday that the world’s economy has weakened in the past six months, despite the efforts of leading central banks to boost activity with ultra-low interest rates.
And she warned that the Ukraine crisis, the deadly Ebola outbreak in West Africa, and Middle East turmoil posed additional threats to the world’s economy.
Without more active stimulus from governments themselves, the managing director of the International Monetary Fund said, there is “the risk that the world could get stuck for some time with a ‘mediocre’ level of growth.”
That imperils efforts to bring down the number of unemployed worldwide, some 200 million people, including 75 million youth.
“Six years after the financial crisis began, we see continued weakness in the global economy. Countries are still dealing with the legacies of the crisis, including high debt burdens and unemployment,” she said in a speech at Georgetown University in Washington, according to the prepared text.
“If people expect growth potential to be lower tomorrow, they will cut back on investment and consumption today.
“This dynamic could seriously impede the recovery, especially in advanced economies that are also grappling with high unemployment and low inflation. This is the case for the euro area.”
Lagarde said the IMF was forecasting “only a modest pickup” for next year, and that governments needed to do more, with better-targeted spending and “growth-friendly” reforms.
In addition, more public investment in infrastructure would improve economies, acting as “a powerful impetus for growth and jobs.”
“The world needs to aim higher and try harder, to do it together,” she said.