Lagarde, IMF MD

The fall in oil prices to their lowest levels in more than three years should give a boost to the sagging world economy, the International Monetary Fund said Wednesday.

In a report to the G20 group of leading industrial powers ahead of the leaders’ summit in Brisbane this weekend, the IMF said the world economy still faces stiff headwinds from a number of areas, particularly sluggish growth in Europe.

But after a nearly 20 percent fall in prices since September, the Fund said, “all else equal, the recent appreciable fall in oil prices, if sustained, will boost growth.”

The report stuck to the IMF’s 3.3 percent pace of world growth for this year, and 3.8 percent next year, citing weakness in the eurozone, more threats from geopolitical tensions and potential sharp corrections and volatility in financial markets.

It also noted that lower oil price is a double-edged sword, hurting countries dependent on crude exports which are already experiencing slower growth, especially Russia.

“Downside risks continue to be associated with geopolitical tensions, further corrections in financial markets, low inflation in some advanced economies, low potential growth globally, and secular stagnation in advanced economies, and US monetary policy normalization,” the report said.

On Wednesday, US Treasury Secretary Jacob Lew raised pressure on Europe’s leaders ahead of the summit, criticizing “status quo policies” and warning that “the world cannot afford a European lost decade.”

The world cannot “rely on the United States to grow fast enough to make up for weak growth in major world economies,” he said in a speech.