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IMF says global economic recovery has begun

(Agencies)
Updated: 2009-10-01 22:45

The International Monetary Fund on Thursday declared that a global economic recovery has begun led by Asia, also cautioning that the strength of the rebound depended on a rebalancing of global growth.

After a year of being downbeat about prospects for the world economy, the IMF's latest World Economic Outlook revised up its growth forecasts for this year and next.

Full Coverage:  World Economy Recovery? Related readings:  China to lead Asian recovery with 8.5% growth in 2009: IMF  China wants moves on IMF voting at G20: officials  Survey: Optimism on European recovery prospects stays fragile  L-shaped recovery is likely  Bernanke says recession 'very likely over'

"The recovery has started. Financial markets are healing and in most countries growth will be positive for the rest of the year as well as in 2010," the IMF's chief economist Olivier Blanchard told a news conference here before the start of World Bank and IMF meetings.

The Fund now expects world output to contract by 1.1 percent in 2009 before growing by 3.1 percent in 2010. This is more upbeat than its last outlook in July when the Fund projected the world economy would shrink 1.4 percent in 2009, before expanding 2.5 percent in 2010.

Blanchard said at his news conference that the strength of the world economy will depend on rebalancing global growth, an issue that was the focus of a summit of leaders from the Group of 20 in Pittsburgh last week.

"If you think about global rebalancing you realize it is going to have to come from a number of measures and from a number of adjustments. It is very hard to see how this could happen at the current exchange rates," he said.

"In general, it is very hard to see how global rebalancing does not come with an appreciation of Asian currencies of various degrees," he added, without mentioning China's currency, the yuan.

Rebalancing the world economy will require debt-laden countries including the United States to save more and buy less, and big exporters like China to increase domestic spending. Such a process would almost certainly require an even weaker U.S. dollar and for the Chinese renminbi to rise.

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