Economic recovery is beset by tensions, strains – IMF

THE IMF has warned that international economic tensions and strains will sow the seed for the next global crisis.

Speaking when he visited the Monetary Authority of Singapore on Tuesday, International Monetary Fund (IMF) managing director Dominique Strauss-Kahn (right) said while the world recorded positive economic growth as it recovered from the recent economic crisis, that recovery was worryingly marred by tensions and strains.

“While the recovery is underway, it is not the recovery we wanted. It is a recovery beset by tensions and strains, which could even sow the seeds of the next crisis,” Strauss-Khan said.

The IMF’s latest forecast, released last week, projects global growth of four and half per cent this year.

Strauss-Kahn said global economic recovery depended on taking a holistic approach to managing the world’s economy that focused not only on standard macroeconomic and financial policies, but also on job creation and social protection.

“Without jobs and income security, there can be no rebound in domestic demand and ultimately, no sustainable recovery,” he said.

Strauss-Kahn warned that the pre-crisis pattern of global imbalances was re-emerging with economies with large external deficits, like the US still being driven by domestic demand and growth in economies with large external surpluses, like China and Germany, still being powered by exports.

“As the IMF warned in the years leading up to the crisis and as the G-20 has emphasised these global imbalances put the sustainability of the recovery at risk,” he said. “The global growth gap is also straining the recovery in other ways. Energy prices are rising swiftly, reflecting rapid growth in the emerging economies. Food prices are raising too though here supply shocks are the main reason with potentially devastating consequences for low-income countries.”

Strauss-Kahn also said large and volatile capital flows to emerging economies was another challenging development that was complicating macroeconomic management and in some cases raising concerns about financial stability.

Source: http://www.postzambia.com