Global Economy Will Not Recover Before 2009: IMF

Source : The Business Times, May 15, 2008

Problems include imbalances between currencies; rising oil and food prices

(JERUSALEM) The International Monetary Fund does not expect the global economy to recover before next year, its chief Dominique Strauss-Kahn said yesterday.

Mr Strauss-Kahn told a conference in Jerusalem to mark Israel's 60th birthday that while a 'large part' of a global financial crisis was 'probably' over, he did not foresee an end to the economic slowdown before next year.

'It's too early to know if the financial crisis is really behind us,' he told a session at the conference on the global economy. 'Probably a large part of the financial crisis is behind us, but it is difficult to know if everything is behind us.'

'How long will the slowdown last? I don't see a recovery before 2009,' he said, noting that emerging markets were doing well despite problems in the United States and other developed economies.

Mr Strauss-Kahn also said that along with the sub-prime mortgage crisis, one of the biggest problems to solve was imbalances between global currencies, with some undervalued and some overvalued. He did not give specifics.

Rising oil, commodity and food prices also remained a drag on the global economy, he said.

Former Federal Reserve chairman Alan Greenspan also said that the US could face a mild recession.

US economic data suggests that the world's biggest economy could face a mild recession, he was quoted as telling Asian investors yesterday.

'He said that the data coming out of the US so far suggests a mild recession. The risk is really on the housing side,' a participant quoted Mr Greenspan as telling a private Deutsche Bank event.

The former Fed chairman spoke to the meeting in Singapore via videolink from Washington.

Mr Greenspan, who was quoted as saying earlier this month that the US had fallen into an 'awfully pale recession', also told the investor meeting that the credit crisis would end when home prices in the United States begin to stabilise, members of the audience said.

'When home prices stabilise, that would mark the end of the credit crisis,' the participant quoted Mr Greenspan as saying.

'The last part of liquidation will only occur in early 2009, but he argued that it is likely home prices could well stabilise before that,' the participant, who declined to be identified, added.

The US economy is reeling from a housing-led slowdown.

Mr Greenspan also said that global price pressures could remain firm because the effect of China's cheap exports is waning.

'We are entering a period where the disinflationary pressure from the exports of China have bottomed out,' the participant quoted Mr Greenspan as saying. -- Reuters