WASHINGTON - World economy is facing gloomy prospects and all countries need to take action to deal with the global challenge, said the head of the International Monetary Fund (IMF) on Thursday.

The current world economy outlook is "quite gloomy" with downside risks increasing, slow growth than expected, higher deficit than predicted and public finances that are not in particular good condition, IMF Managing Director Christine Lagarde said of Europe's debt crisis in remarks at a US State Department conference.

"It's not a crisis that will be resolved by one group of countries taking action," she said. "It's going to be hopefully resolved by all countries, all regions, all categories of countries actually taking action."

She noted that the debt crisis needs to be tackled decisively with global cooperation to avoid the retraction, rising protectionism, isolation which once happened in the Great Depression of the 1930s.

After several European summits that vowed to solve the issue, the Europe's debt crisis is still escalating. Global markets remain worried about the future of the euro area and its spillover effect on the rest of the world.