January 9, 2012 / 6:09 AM / 7 years ago

Europe may avoid recession this year, IMF says

International Monetary Fund director Christine Lagarde speaks during a conference on 'Africa's Future: Responding to Today's Global Economic challenges" in Lagos December 20, 2011. REUTERS/Akintunde Akinleye

JOHANNESBURG (Reuters) - Europe as a whole may avoid a recession this year and there were reasons to be more upbeat about prospects for the region, South Africa’s Business Day newspaper quoted International Monetary Fund head Christine Lagarde as saying.

“The euro-zone scene has changed massively over the last 18 months or so ... there are reasons to be a little bit more upbeat about the prospects,” she told the daily in an interview published on Monday after a visit to South Africa last week.

Some analysts believe a recession is inevitable in the euro zone, where several member states have grappled with sovereign debt problems for months, triggering global risk aversion which has hit emerging markets such as South Africa the hardest.

“Our assessment is that even if some of the euro-zone countries are in a recession technically for some or all of 2012, the whole of the zone might not technically be in a recession,” Lagarde said.

“You’ve got very different economies cruising at different growth rates. That is going to have an impact on the entire euro zone and might avoid recession for the euro zone at large.”

However, the euro zone crisis could hurt South Africa’s economy, Lagarde said on Saturday. She urged Africa’s economic powerhouse to maintain supportive monetary policy to ensure growth in the medium term.

The central bank in Pretoria kept domestic rates at historical lows last year after slashing them by 650 basis points in the two years to end-2010.

Analysts expect rates to stay on hold for much of this year, despite rising inflation, to give the struggling economy some breathing space.

Reporting by Stella Mapenzauswa; Editing by Ed Cropley

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