World economy
October 2, 2009
Although the global economy appears to recovering from its deepest recession in over 60 years, the heads of the world's two most important international financial institutions warned politicians and financial markets Friday against complacency.
"The fact that growth is coming back is the first good news, but we still will contemplate rising unemployment for months and months. And of course it casts a long shadow over the recovery," said International Monetary Fund president Dominique Strauss-Kahn at an annual meeting of the IMF and the World Bank in Istanbul.
The IMF said the world economy had pulled out of recession, according the Fund's semi-annual World Economic Outlook released on Thursday. But it projected unemployment would reach more than 10 per cent in the United States in 2010 and climb to nearly 12 per cent in the Euro area by 2011.
One of the IMF's nightmare scenarios is that governments and central banks could put an early end to their joint efforts fighting the crisis, hampering a recovery before it can become self-sustaining.
But Straus-Kahn also stressed that the recent recession had provided the international community with an historic opportunity to reshape the global economic and financial framework under the umbrella of the G-20 group of nations.
A new global economic order
World Bank President Robert Zoellick also predicted a rough ride for the global economy in the years to come - especially for poorer countries and said it was too early to declare success in the world's struggle to contain the economic crisis.
"2009 will continue to be a difficult year. And 2010, when much of the stimulus action will run out, remains a highly uncertain year," Zoellick said.
He remained extremely worried about the aftermath of the crisis, which began last September with the collapse of US investment bank Lehman Brothers. Without financial assistance by the international community Africa, an innocent victim of the crisis, will not be able to recover.
Zoellick also warned that his institution could run out of resources by the end of 2011 and he is lobbying for more support from wealthier nations to help developing countries boost domestic demand in coming years. The World Bank has nearly tripled its lending to $33 billion (47.9 billion euros) in 2009 as the world plunged into the deepest recession in seven decades.
By contrast the IMF, which traditionally caters to the financial needs of emerging market countries and industrialized nations, has seen its lending resources tripled to $750 billion by the leaders of the G-20 group of industrial and developing states.
Many emerging market countries, which are already leading the recovery, are poised to become major drivers of world growth in the future. According to Zoellick the reweighting of the world economy is a positive development.
"A multipolar economy, less reliant on the US consumer, will be a more stable global economy," Zoellick said.
Author: Thomas Kohlmann, Istanbul
Editor: Brett Neely