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WORLD> Europe
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World economy gropes on road to recovery amid mixed signs
(Xinhua)
Updated: 2009-10-02 00:27 However, the bouncing back so far has mainly been driven by huge public spending and inventory adjustment by firms, which cannot last forever, said Olivier Blanchard, the IMF's Economic Counsellor and Director of Research Department, at a press conference here Thursday. Mounting fiscal deficits, insufficient bank credit to support private investment and weak private demand due to high jobless rate will pose challenges to the future process of economic mending, he said.
In the United States, consumer confidence index fell unexpectedly in September to 53.1, compared with 54.5 in August, as the country's unemployment rate stood at 9.7 percent in September, its highest level in 26 years. In Japan, seasonally adjusted exports slipped 1.3 percent in July from June, indicating a receding effect of strong government stimulus in the world's major economies. Debt levels are projected to reach 110 percent of GDP by 2014 in advanced countries, where fiscal authorities also face additional pressure from an aging population and increasing healthcare costs, said Blanchard. Meanwhile, banks purified from poisonous assets still have a long way to go in rebuilding capital, strengthening earnings, and weaning themselves off government funding support, the IMF said in Wednesday's report. Another risk came from trade protectionism, which has been on the rise since the financial crisis translated into a recession. Economists have blamed a spiral of trade wars during the crisis in the 1930s for helping push the world economy into the Great Depression. Leaders of the Group of 20 richest and fast-growing countries agreed last month to step up efforts to complete the Doha round of trade talks by 2010. But many governments have been reluctant to reach a sweeping global agreement, which will open more markets including the agriculture area and is viewed as a threat to the already shrinking domestic job market. IMF Managing Director Dominique Strauss-Kahn said Thursday it will be difficult to say the crisis is over until unemployment drops, which can come later than a resumption of economic growth. He made the remarks when in Turkey's largest city Istanbul for the IMF and World Bank annual meetings to be held on Oct. 6-7. "The recovery has really started," he said during a speech at the Bilgi University. "But that does not mean the crisis is over."
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