IMF Sees Recovery But There Are Caveats Financial Scene (07-Feb-2010)
In the latest update to its World Economic Outlook, the International Monetary Fund sees economic prospects across the globe improving substantially.
However, the latest update on January 26 points out that the recovery is faster than expected, while some of its previous reports said that the worst of the crisis was over and that recovery was on.
Compared to its last update (October 2009), it has marked up its forecasts for several countries and regions.
Global output is forecast to go up by 3.9% and 4.3% in 2010 and 2011, respectively, above the October forecasts of 3.1% and 4.2%.
Meanwhile, advanced economies too are likely to do better than originally expected with growth rates of 2.1% and 2.4% for 2010 and 2011, respectively whereas last year, these economies as a group declined by 3.2%.
The U.S., which had a negative growth of 2.5%, will post optimistic growth rates of 2.7% this year and 2.4% in the next year.
According to the IMF, the category "Emerging markets and developing economies" will grow by 6% and 6.3% in 2010 and 2011.
China and India lead the table with projected growth rates of 10% and 7.7%, respectively, in 2010 and 9.7% and 7.8% in 2011 while the sharp recovery in these two countries has been well recognized.
Additionally, Japan''s exports have turned optimistic after a long slump mainly due to the demand from China.
The fact that the Indian economy has been on an even keel even during the worst phase of the recession and has now entered a higher growth trajectory has rekindled capital flows, both foreign direct investment (FDI) and foreign institutional investment (FII).
On the other hand, the IMF report, while being more positive about global economic prospects than at any time during the past two crisis ridden years, nevertheless sounds a caution or two.
Advanced economies are still dependent on government stimulus measures, which obviously cannot be continued indefinitely.
Previously, the International Monetary Fund (IMF) warned that fiscal sustainability is going to be a massive problem in the coming years, with many countries piling up huge debts due to the global crisis.
Many developed and developing nations came up with huge stimulus measures to boost their respective economies in order to deal with the raging financial chaos.
The International Monetary Fund stated that the global economy was on the edge to grow more strongly than previously expected in 2010, by 3.9%.
The IMF said that with slow revival in advanced economies due to relatively strong growth in emerging and developing economies, the growth forecast was 0.8% higher than the 3.1% estimated 4 months ago.
Moreover, it was said that according to a statement made by the International Monetary Fund (IMF) which expressed its concern regarding the global economy, stated that though the world economy is weak at present but is giving a good fight to the financial crisis and recovering at faster rate than the expectations made.
Mr. Dominique Strauss-Kahn, Managing Director of IMF said later this month in an update of the IMF''s World Economic Outlook, the IMF would disclose more optimistic growth forecasts.
However, earlier, although the IMF sees no major threat of asset price bubbles, the head of the International Monetary Fund (IMF) has cautioned against excessive capital inflow in some Asian countries.
IMF managing director Dominique Strauss-Kahn stated that the backward flow of money could cause problems to the recovering economies.
He said that there is trouble in having too big capital inflows coming to some countries and sometime for some reasons, this can have an unexpected end and this create difficulties.
Meanwhile, it was said that the global economy is recovering faster than expected but growth continues to be fragile as many of the developed nations are still dependent on government stimulus, the International Monetary Fund has said. The revival is led by emerging markets, especially those in Asia, whereas most of the advanced economies are witnessing sluggish recovery.
IMF managing director Dominique Strauss-Kahn has said the global economy is recovering significantly faster than expected, but growth in most advanced economies is still dependent on government stimulus measures and remains fragile. He noted that while emerging market economies, mainly in Asia, are leading the recovery, many developed countries are still seeing weak private demand and rising job losses.
The International Monetary Fund (IMF) is an international organization that oversees the global financial system by following the macroeconomic policies of its member countries; in particular those with an impact on exchange rates and the balance of payments. It is an organization formed with a stated objective of stabilizing international exchange rates and facilitating development
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