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Declined oil prices will boost global eco, says IMF chief Lagarde

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Washington (Dec. 02, 2014): The recent decline in oil prices will help boost global economy, IMF chief Christine Lagarde has said, as global oil prices have tumbled to a multi-year low.

“It is good news for the global economy,” Lagarde said at The Wall Street Journal CEO Council annual meeting here yesterday.

For the United States, low energy prices would help accelerate the economic growth to a 3.5 per cent next year from the October forecast of 3.1 per cent, she said, adding that Europe is also expected to benefit from lower oil prices.

Lagarde, however, noted that the euro zone also faces a risk of the “new mediocre’’, and described it as an economy marked by slow growth, low inflation and high unemployment.

But at the same time, she asserted that reluctant political leaders need to adopt more job-friendly labour market reforms, aggressive and innovative monetary policy and other structural reforms.

During the meeting, the International Monetary Fund Managing Director was highly critical of Japan for being slow on implementation of fiscal and labour market reforms.

On Russia, Lagarde said lower prices are adding to their fragility and their vulnerability.

Oil prices tumbled to multi-year lows last week after the Organisation of the Petroleum Exporting Countries decided to maintain its production quotas, rather than lowering its output target.

Crude oil has fallen about 40 per cent since mid June and the prices had yesterday touched its lowest level since mid-2009 before US oil prices posted their biggest one-day gain in two years overnight.