Davos – The head of the International Monetary Fund (IMF) has warned that deflation remains a real risk to economic recovery in the eurozone. Despite signs of recovery across the world, Christine Lagarde said potential risks must not be ignored.One of these was the fact that eurozone inflation, at 0.8 per cent, remained ‘way below’ the 2 per cent target set by the European Central Bank (ECB). She was speaking on the final day of the World Economic Forum in Davos, Switzerland. Deflation can hinder growth, as prices and the value assets continue to fall. Lagarde said despite signs of recovery everywhere, there were ‘old risks’ and ‘new risks’. Old risks included any failure to continue banking reforms and re-balance economies, she said. New risks were, how emerging economies responded to the winding down of economic stimulus measures in the US, and the problems facing economies whose inflation rate remained stubbornly below target.