IMF says worst not over

IMF says worst not over

LONDON (Reuters) - The head of the IMF questioned on Monday any debate about when to roll back stimulus spending, saying the world economy had yet to weather the worst of a recession that claimed a record number of European jobs.

The 16-country euro zone lost a record 1.22 million jobs in the first quarter, official data showed. Employment during the first quarter fell 1.2 percent year-on-year, the deepest annual drop since measurements started in 1995.

Even if some form of economic recovery is not far off, analysts say unemployment will climb for many months to come.

Underlining the fragile state of the global economy, an influential economist said China would not see a rapid rebound and South Korea's finance minister said its economy was still sliding, although the pace had slowed.

But in southern Italy, Group of Eight finance ministers meeting at the weekend described their economies in the most positive terms since the collapse of U.S. bank Lehman Brothers nine months ago heightened the world's worst financial crisis since the Great Depression of the 1930s.

"Their (G8) stance is that we are beginning to see some green shoots but nevertheless we have to be cautious," International Monetary Fund chief Dominique Strauss-Kahn said during a visit to Kazakhstan. "The large part of the worst is not yet behind us."

Pressure has been building in the G8, particularly from fiscally conservative nations such as Germany and Canada, for plans to wind down stimulus as soon as it is no longer needed. Read Article... http://www.reuters.com/article/newsOne/idUSTRE55E0BJ20090615

IMF, G-20 and the global crisis

World Faces Crisis Crossroads at G-20 Summit, Says IMF
http://www.imf.org/external/pubs/ft/survey/so/2009/POL032709A.htm

Leaders of the Group of Twenty (G-20) advanced and emerging market economies gathering at a summit in London next week face a crossroads in the global economic crisis, with the opportunity to spur a recovery next year if they take the right action, IMF Managing Director Dominique Strauss-Kahn said.
In a video conference with journalists based in London, Paris, and Washington, Strauss-Kahn outlined five key subjects on which the IMF wanted to see progress at the summit to combat the worst economic downturn in 60 years, in addition to considering how to improve regulation of the fractured global financial system.

• Cleanup of the financial sector. Strauss-Kahn said cleaning up the balance sheets of banks and getting the financial sector working again was critical to reviving world growth. “Countries can do it in different ways, but they have to do it and do it now.”

• Ensuring fiscal stimulus is available for next year. Strauss-Kahn said that governments around the world had done very well in announcing stimulus plans to counter the downturn and create jobs. But they now needed to ensure that efforts were sustained in 2010.

• Helping emerging markets hit by the crisis. Although the crisis did not start with emerging markets, the collapse of trade finance and the drying up of capital flows is hurting many emerging markets. The IMF needs enough resources to assist emerging markets, otherwise a collapse in emerging economies would have a devastating impact on developed economies, reinforcing the crisis.

• Aiding low-income countries. Some of the world’s poorest countries are being affected by the slowdown in world growth, with exports “falling off a cliff” and the prices of commodities and flows of aid falling. Strauss-Kahn said he wanted to ensure a doubling of IMF concessional lending to low-income countries to safeguard them during the crisis.

• Boosting IMF resources. The IMF hopes to at least double its lendable resources to more than $500 billion so that it is ready to help out and provide confidence that economies will have access to funds during the crisis. Japan has provided $100 billion in extra money and the European Union has committed EUR 75 billion.

Download PDF. IMF Note on Global Economic Policies and Prospects — Executive Summary
March 19, 2009. http://www.imf.org/external/np/g20/pdf/031909a.pdf
Global economic activity is falling—with advanced economies registering their sharpest declines in the post-war era—notwithstanding forceful policy efforts.
According to the latest IMF forecast, global activity is expected to decline by around ½ to 1 percent in 2009 on an annual average basis, before recovering gradually in the course of 2010.
Turning around global growth will depend critically on more concerted policy actions to stabilize financial conditions as well as sustained strong policy support to bolster demand.

Dominique Strauss-Kahn (IMF) said Advanced Economies Already in Depression

Dominique Strauss-Kahn said Advanced Economies Already in Depression

(Source Bloomberg)
Feb. 7 (Bloomberg) -- Advanced economies are already in a "depression" and the financial crisis may deepen unless the banking system is fixed, International Monetary Fund Managing Director Dominique Strauss-Kahn said.
“The worst cannot be ruled out,” Strauss-Kahn said in Kuala Lumpur, where he was attending a gathering of central bankers from Southeast Asia. “There’s a lot of downside risk.”
Ten days ago, the IMF cut its world-growth estimate for this year to 0.5 percent, the weakest pace since World War II. Stimulus packages alone won’t succeed in dragging the global economy out of recession unless confidence is restored in the banking system, Strauss-Kahn said today.
“All this will work if, and only if, the different countries are likely to do what they have to do in terms of restructuring the banking sector,” he said. “And today it’s not done.”
The U.S. economy has lost 3.57 million jobs since a recession started in December 2007, its biggest employment slump of any economic contraction in the postwar period as companies from Macy’s Inc. to Caterpillar Inc. cut costs. The U.K. economy will shrink this year by the most since 1946, the IMF forecasts.

IMF Spells Out Need for Global Fiscal Stimulus

IMF Spells Out Need for Global Fiscal Stimulus
IMF Survey online December 29, 2008

As the world struggles to contain the continued fallout from the financial crisis, attention has shifted from rescuing failing financial institutions to supporting domestic demand, which has fallen off sharply almost everywhere.
In November, the IMF cut its forecast for global growth by ¾ percentage point to 2.2 percent for 2009. But, with the crisis spreading rapidly, IMF First Deputy Managing Director John Lipsky has said that the Fund is likely to make further downward revisions in the new global forecast it will announce in January 2009.
In this interview, Olivier Blanchard, Economic Counsellor, and Carlo Cottarelli, Director of the Fiscal Affairs Department, flesh out the call for a global fiscal stimulus, first proposed by IMF Managing Director Dominique Strauss-Kahn in the context of the November 15 emergency summit called by the leaders of the Group of 20 (G-20) industrialized and emerging market economies.Read article...

The International Monetary Fund’s Managing Director Dominique Strauss-Kahn said in a Jan. 9 interview that governments in Western Europe are “behind the curve” in implementing stimulus packages and are “underestimating the needs.” He said the full impact of the slump hasn’t hit the region, where “shops are still full.”

Fiscal Policy for the Crisis (pdf)