Roundup: IMF faces uneven global recovery ahead of spring meetings
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E-mail Xinhua, April 16, 2013
The International Monetary Fund faces an uneven global economic recovery as thousands of diplomats, journalists and economists from countries worldwide descend on Washington Tuesday for the Fund's spring meetings.
IMF Managing Director Christine Lagarde has warned the global economy faces a "three-speed" recovery, with emerging economies faring well, the United States and other countries on the mend, and the euro area and Japan not out of the woods yet.
This latest phase in the recovery is seeing rapid growth among emerging economies, with emerging Asia and sub-Saharan Africa leading the pack with 75 percent growth over the last five years.
The United States is growing somewhat, although the sequester - the spate of spending cuts that kicked on March 1 - will stunt growth by 0.5 percent, the IMF said.
The eurozone's growth is little to none, with the economies of Greece and Spain in tatters amid massive unemployment. Japan's debt of 245 percent of GDP "looks increasingly unsustainable," Lagarde warned last week.
The IMF is calling on Washington to enact a more balanced fiscal policy that includes a medium-term plan to reduce debt, and billed Washington's short-term debt reduction plan as too aggressive.
For the euro area, cleaning up the region's troubled banking system is among the Fund's top concerns, and the IMF has called for recapitalizing, restructuring, or - where necessary - shutting down banks.
The Fund last week called Japan's framework for easing monetary policy a "positive step," but added the island nation needs to take action to reduce public debt and make structural reforms to kick-start the world's third largest economy, which remains mired in deflation.
"The major weak points are Europe, Japan, and the United States in that order because they tend to drive growth in the rest of the world," Brookings Institution Senior Fellow Barry Bosworth told Xinhua.
"Other countries, such as China and India, have experienced a slowdown, but mainly in response to slower growth in the major economies, and their own problems are smaller," said Bosworth, a former White House economist.
"The latest IMF growth projections are quite reasonable and in line with private forecasts. The one question mark is Japan, where there is considerable uncertainty," he said. "The exchange rate decline is big and it may lead to a substantial improvement in exports over the next year, but there is no agreement on what will happen to the price level."
Other analysts said risks related to the uneven recovery threaten countries with high levels of poverty.
"They are not going to have the economies of scale and the comparative advantages that they need to remain competitive if the global environment accelerates in an uneven fashion," Daniel Hanson, a researcher at the American Enterprise Institute, told Xinhua.
"If they have to compete sharply at some points in time and then not compete at all at other times ... it's very difficult in nascent markets," said Hanson.
Other issues have continued to bedevil the global economy since it began to tank five years ago, and the Fund continues to call for more progress on regulating too-big-to-fail financial institutions, derivatives and shadow banking.
The Fund continues to call for strengthening investment in Germany and increased domestic consumption in China, as well as more emphasis worldwide on growth.
Jobs continue to be a major concern for the IMF as eurozone countries grapple with massive unemployment.
"Job creation is an urgent priority," Lagarde said. "Without this, we risk a wilderness of wasted potential and ruined ambition - especially for a generation of young people."
Indeed, eurozone youth unemployment hit 23.9 percent in March, with youth jobless rates in economic basket cases of Greece and Spain remaining over 50 percent, according to Eurostat.
Hanson noted that many are concerned about the possibility of inflation, although the IMF last week downplayed those fears.
"A typical danger of the types of capital imbalances we currently see would be high inflation," he said. "The IMF has - rightly, I think - been out trying to dispel the idea that huge inflation is coming."
"It's something to monitor, but not something to be afraid of at this stage. The IMF is explicitly advocating that it's not something to worry about, and that's unusual - rarely does the IMF directly answer its critics," he said. Endi
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