IMF chief warns of prolonged subpar growth for global economy

The world economy is turning the corner of the great recession, but obstacles lie ahead to overcome low growth trap, said the International Monetary Fund ( IMF) chief on Wednesday.

"Certainly the global economy has stabilized since the onset of the financial crisis, but the recovery is too weak for comfort," Christine Lagarde, managing director of the IMF, said in a speech at the School of Advanced International Studies of Johns Hopkins University in Washington, ahead of the 2014 IMF-World Bank Spring Meetings.

"Moreover, unless countries come together to take the right kind of policy measures, we could be facing years of slow and sub- par growth -- well below the solid, sustainable growth that is needed to create enough jobs and improve living standards into the future," she said.

Lagarde said the IMF projects modest improvements in 2014 and 2015 for the world economy, compared with the 3 percent growth rate in 2013, but the recovery would remain below past trends.

She advised policymakers to be alert on short-term obstacles to sustained growth, including the potentially persistent low inflation period in the euro area, and the rise of geopolitical tensions as a result of Ukraine crisis, which she cautioned, could cloud the global economic outlook.

"The situation in Ukraine is one which, if not well managed, could have broader spillover implications," she said.

Emerging market economies also face challenges of rising corporate leverage and risks of heightened market volatility associated with the tapering of quantitative easing in the United States.

Lagarde called for coordinated actions to address unemployment, high debt and fiscal uncertainty, warning that the costs of continued sluggish growth are high.

She suggested that well-prioritized investment and inclusive labor market reforms would increase potential output and jobs. " Reforms to product markets and services can help break down vested interests, boost competition, and unleash huge growth and employment potential," she added.

The IMF chief also expressed disappointment at the much-delayed implementation of the IMF 2010 quota and governance reform package, with the United States as major stumbling block.

Lagarde said although U.S. Congress failed to ratify the reform package in its most recent bill, "it is not the end of the story." International cooperation will be high on the agenda next week during the Spring Meetings, she said.