World economy between recession and inflation

The world economy remains stuck “between the ice of recession and the fire of inflation”, IMF managing director Dominique Strauss-Kahn said on Friday.

Strauss-Kahn, addressing a conference in Ukraine’s Black Sea resort of Yalta, said the world financial market crisis was largely over, though its consequences would be felt for some time to come.

Emerging market economies, he said, were experiencing good growth, though inflation, linked to high oil and food prices, remained a serious problem.

“The biggest part of the crisis is probably behind us,” Strauss-Kahn said.

“Some parts could be still in front of us. The economic consequences of the crisis are obviously in front of us.”

He described the world response to the crisis as “broadly adequate. The central banks collaborated well together and finally they solved the question that avoided a crisis.”

But conditions in the world economy remained troubling.

“No one can say that the world economy is at a good temperature.
We are just between the ice of recession and the fire of inflation,” he said.;

Joint inflation and turmoil on financial markets, he said, amounted to “the first crisis of the 21st century” with the problem originating in the United States.

“It was the strongest economy and it was at the top of the pyramid of power,” he said. “What happened now is that the pyramid is a bit upside down. It is no longer a pyramid of risk.”

But emerging market economies were coping well, he said.

“The good news is after decades of stop-and-go cycles emerging economies are really emerging, he said, citing strong economic growth not only in India and China but in other regions, like West Africa.

Inflation, however, remained “a huge problem. It’s a case of life and death”, attributable to imports of oil and food—key components in price indices.

“They have almost no tools to deal with this,” Strauss-Kahn said. - Reuters

Client Media Releases

UKZN School of Engineering celebrates accreditation from ECSA
MTN celebrates 25 years of enhancing lives through superior network connectivity
Financial services businesses focus on CX