The International Monetary Fund will reduce its estimate forglobal growth this year on weakness in investment, jobs andmanufacturing in Europe, the U.S., Brazil, India and China,Managing Director Christine Lagarde said.

“The global growth outlook will be somewhat less than weanticipated just three months ago,” Lagarde said in a speech inTokyo today. “And even that lower projection will depend on theright policy actions being taken.” The new outlook will beannounced in 10 days, after an April estimate of 3.5 percent, shesaid.

Interest-rate cuts in China and Europe yesterday and the Bank ofEngland's boost to an asset-purchase program underscored thefragility of the global recovery as austerity measures and debtburdens weigh on advanced nations. Lagarde is pressing for fiscalunion in Europe to aid growth and financial stability as nationssuch as Greece wrestle with balancing their books.

The “key emerging markets” of Brazil, China and India areshowing signs of slowdown, Lagarde said. Those three countriesalong with Russia will comprise more than 20 percent of the worldeconomy this year, according to IMF data.

“Over the past few months, the outlook has regrettably becomemore worrisome,” Lagarde said. “Many indicators of economicactivity — investment, employment, manufacturing — havedeteriorated. And not just in Europe or the United States.”

The IMF has already lowered its U.S. growth estimate to 2percent from April's 2.1 percent.

European Union leaders agreed at a June 28-29 meeting to loosenbailout rules, lay the foundations for a banking union and breakthe link between sovereign and banking debt through the directrecapitalization of lenders.

The summit was “of more significance” than past attempts to stemthe crisis, Lagarde told Bloomberg contributor Judy Woodruff in aJuly 3 televised interview.

“They need to move towards fiscal union as well,” Lagarde saidthen. “But they're heading in a new direction together and that's aclear sign that things are changing.”

The MSCI Asia Pacific Index was 0.6 percent lower at 3:00 p.m.in Tokyo on concern yesterday's central bank easing won't be enoughto boost growth.

As Greece struggles with elevated unemployment and a recession,the nation has said that it wants to renegotiate its bailout,something Lagarde said she was not in the mood for, in a July 3interview with CNBC. Officials from the IMF, ECB and the EuropeanCommission are assessing the country's progress in implementing theterms of a second international rescue package.

Yen Concerns

Japanese Prime Minister Yoshihiko Noda told Lagarde thatsustained gains in the yen because of the euro region's crisis aredamaging his country's economy, according to a statement releasedby his office today.

“The euro zone crisis is the most important problem facing theglobal economy at present,” Noda said in the statement. Thestrength of the yen “does not reflect the real state of Japan'seconomy,” he said.

Asia's second-biggest economy needs to sustain a recovery fromlast year's earthquake and tsunami without enlarging a public debtburden that is already the world's biggest. Gains by the yen crimpexporters' sales and profits, dragging on the nation's growth.

The gains in the currency and impact on exports from slowingEuropean growth are “two risks of primary concern” for Japan,Lagarde said. She praised the passage of Noda's bill to double theconsumption tax through the lower house of parliament last month asa “very positive step,” adding that it was “critical” for it to beimplemented. The legislation has yet to be voted on in the upperhouse.

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