BEIJING, China - The head of the International Monetary Fund warned Wednesday the global economy faces the risk of a "lost decade" of little or no growth and Asia should be on guard to deal with a downturn.
Without bold, co-ordinated action, the world might face worsening financial instability and a possible collapse of demand, said Christine Lagarde, on her first visit to Beijing since becoming IMF managing director in July.
"Ultimately, we could run the risk of what some commentators are already calling a lost decade," she told reporters.
Asian economies are relatively strong but need to be "prepared for any storm," said the former French finance minister. She said Asian governments that have tightened monetary policy to fight inflation should "pause a little bit."
"Asia is not immune. Let's make no mistake," Lagarde said.
Last month, the Washington-based IMF trimmed its forecast for Asia's growth this year to an average of 6.3 per cent from its previous outlook of 7 per cent, citing Europe's debt crisis and a possible U.S. slowdown.
After a strong start to the year, Asian growth slowed because of sluggish demand from advanced economies and Japan's March tsunami, which disrupted industrial production and exports across the region.