Worst of global crisis not yet over, says IMF chief

The worst of the global economic crisis is not yet over but there are signs that the world has started to crawl out of recession, International Monetary Fund (IMF) chief Dominique Strauss-Kahn said on Monday.

Finance ministers of the Group of Eight (G8) nations agreed over the weekend that the global economy was showing encouraging signs of stabilisation and started to consider how to unwind rescue steps for their economies.

The IMF managing director said on a visit to Kazakhstan that he largely agreed with their position, but appealed for caution in assessing the state of the global economy.

“Their [G8] stance is that we are beginning to see some green shoots, but nevertheless we have to be cautious ... The large part of the worst is not yet behind us,” he said in opening remarks at talks with Kazakh Prime Minister Karim Masimov.

“We see, at the IMF, a recovery towards the beginning of 2010. 2009 is already done, we know it’s a bad year,” he added.

“At the global economic level, the growth will be -1,3%, which is the first negative growth since the Depression.
2010 may be better and we expect recovery in the first half of 2010.”

Pressure has been building in the G8 for plans to wind down economic stimulus as soon as it is no longer needed—“exit strategies” that would prevent market interest rates from climbing high enough to threaten economic recovery.

Strauss-Kahn referred to credit growth as a sign that financial activity was beginning to pick up, but did not say whether the IMF was ready to help with a possible “exit strategy” once economic recovery is certain.

He said an expected global economic revival in the first half of next year would help emerging market nations such as Kazakhstan to return to healthy gross domestic product growth.

“...The recovery that we expect at the global level for the first half of 2010 can have a rapid effect on an economy like yours which can pick up rapidly after the global recovery,” he told the Kazakh prime minister.

Like other regional economies, ex-Soviet Kazakhstan—central Asia’s biggest economy—has been hit hard by the crisis which has ended years of double-digit growth.

The IMF expects the Kazakh economy to shrink 2,2% this year, a more pessimistic forecast than the one percent growth seen by the Kazakh government.

Strauss-Kahn said, however, that Kazakhstan’s own forecast could prove realistic depending on the state of the global economy.

“The forecast of the government, which is a little higher than ours, is not unreachable,” he said. “We are in a time where forecasts are difficult to make.”—Reuters

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