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Imf Chief Hints At Cut In Growth Forecasts - Investment Deficit

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http://www.theguardian.com/business/2014/jul/06/imf-chief-christine-lagarde-growth-forecasts

Global economic activity should strengthen in the second half of the year and accelerate in 2015, although momentum could be weaker than expected, Christine Lagarde, head of the International Monetary Fund, said on Sunday, hinting at a slight cut in the fund's growth forecasts.

Lagarde said central banks' accommodative policies may have only a limited impact on demand and that countries should boost growth by investing in infrastructure, education and health, provided their debt stays sustainable.

The IMF's update of its global economic outlook, expected later this month, will be "very slightly different" from the forecasts published in April, she said.

In April, the IMF had predicted that global output would grow by 3.6% in 2014 and 3.9% in 2015.

"Global activity is picking up but the momentum could be less strong than we had expected because potential growth is weaker and investment ... remains subdued," she told an economic conference in southern France.

Lagarde made a plea for more public investment, saying that the "investment deficit" in both the public and private sectors was dragging down growth in most countries.

"Despite the many responses to the crisis ... recovery is modest, laborious, fragile, and measures to boost demand, despite the goodwill of central banks, will find their limits," she said.

"We must therefore take steps to boost efforts to strengthen growth. This is the opportunity in a number of countries to relaunch investment, without threatening the viability of public finances."

Ah so we need to cover the investment deficit by spending money we don't have on investment and enlarging govt deficit spending and increasing malinvestment in the economy. Sounds a great plan.

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