IMF says global economy recovering
The global economy is finally recovering from the deepest recession since the war, the International Monetary Fund declared yesterday.
IMF chief economist Olivier Blanchard said world leaders must now focus on ways of sustaining the tentative rebound that is under way.
‘The recovery has started. Sustaining it will require delicate rebalancing acts, both within and across countries,’ Mr Blanchard wrote.
But there are still ‘deep scars’ that will take years to heal, he added.
The assessment comes after official figures showed that Germany, France and Japan emerged from recession in the second quarter of the year.
Yesterday Chancellor Alistair Darling insisted Britain would not be far behind, with growth resuming later this year.
The IMF’s most recent forecasts suggest that global gross domestic product will fall 1.4 per cent this year, before rising 2.5 per cent in 2010.
Its outlook for Britain is far less optimistic, however. Output here could drop 4.2 per cent this year and rebound just 0.2 per cent next year, according to July estimates.
The fund is due to update those figures in the coming weeks.
Mr Darling attempted to strike a positive tone as he addressed Britain’s economic outlook yesterday.
The Chancellor, who is standing in for Gordon Brown during his summer holiday, said that Labour would set out an ‘optimistic view of the future’ in an effort to win the next general election.
The Government has been thrown on the defensive by the rebound in Europe and elsewhere, given that British GDP continued to fall in the second quarter.
However, Mr Darling said: ‘There are signs – you saw that in France, in Germany and Japan this week – that the measures that governments took, the stimulus that they put into their economies is having an effect. The same is happening with us.
‘We will see modest growth next year and if you look at what the Bank [of England] was saying, it does foresee growth continuing thereafter.’
However, Mr Blanchard said that the recovery in advanced economies could be decidedly sub-par.
In particular, he warned that massive government deficits will have to be reined in, making tax hikes ‘inevitable’.
He also said that unemployment would continue to surge into next year. Britain is facing the biggest budget deficit of any leading economy next year, measured as a share of GDP.
Former U.S. Federal Reserve Chairman Alan Greenspan has said he expects the American economy to recover strongly in the second half of this year, but then falter again in 2010.
‘I think we’re OK for the next six months,’ he said. We are getting a recovery in housing starts and motor vehicles, but the process doesn’t have legs.’
Source: Daily Mail