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[News_Editor]

IMF: global economy remains fragile despite 4.8 percent growth

2010-10-06 21:44:29 GMT+7 (ICT)

WASHINGTON, D.C. (BNO NEWS) -- The International Monetary Fund (IMF) on Wednesday said the global economy remains fragile despite its forecasted growth of 4.8 percent this year, before falling back to 4.2 percent in 2011.

IMF's latest World Economic Outlook showed that unemployment remains a major economic and social challenge with over 210 million jobless people across the globe. The number represents an increase of more than 30 million since 2007, and three-fourths of the increase has occurred in advanced economies.

“The world economic recovery is proceeding,†IMF Chief Economist Olivier Blanchard said. “But it is an unbalanced recovery, sluggish in advanced countries, much stronger in emerging and developing countries.â€

The report shows that in advanced economies, growth is projected at 2.7 percent this year and 2.2 percent in 2011, with some economies slowing noticeably during the second half of the year and the first half of 2011. As a result, economic slack will remain substantial and unemployment persistently high for some time.

According to the IMF outlook, prospects are better for emerging and developing economies, which are projected to expand at rates of 7.1 percent and 6.4 percent for 2010 and 2011. Inflation is projected to stay generally low, amid continued excess capacity and high unemployment, with a few exceptions among the emerging economies.

Blanchard continued by saying that the pieces of the global economy were interconnected and countries should act in coordination. The world economy is need of a smooth transition from public to private sector-led growth in many advanced economies, and from external to domestically driven growth in key emerging economies.

“Unless advanced countries can count on stronger private demand, both domestic and foreign, they will find it difficult to achieve fiscal consolidation. And worries about sovereign risks can easily derail growth,†Blanchard warned.

“If growth were to slow or even stop in advanced countries, emerging market countries would have a hard time decoupling. The need for careful design at the national level, and coordination at the global level, may be even more important today than they were at the peak of the crisis a year and a half ago,†he added.

Furthermore, the report shows that government policies need to become more proactive and coordinated to achieve the internal and external rebalancing required for robust real GDP and employment growth.

“The challenge ahead if for policymakers to put in place, in a coordinated manner, policies that support the fundamental adjustments needed for a return to healthy medium-term growth,†the report states.

The IMF warned that in order to ensure that a still-damaged financial sector does not act as a drag on activity requires restructuring or resolving weak banks; enhancing banks’ capital adequacy and liquidity buffers; pursuing orderly and globally consistent regulatory reform; and strengthening supervision and oversight of the financial system.

-- © BNO News All rights reserved 2010-10-06

[asiawatcher]

The IMF like the Fed are major manipulators of currencies and funds and at large, responsible for the financial chaos the world is presently experiencing. This projection and summary is however most likely correct to a great degree by the assessment of who is working and who is not.

The emerging economies are definitely far stronger than established economies of US, Europe etc but this kuck has not really hit yet - and that is yet to come. When private corporate starts to collapse and there is no bailout funds from their Governments then we will see the true levelling of what is being said here. IT is still bouncing along but has not hit bottom yet (in my assessment).