IMF chief warns of global recession

The international monetary fund chief has warned that the global economy could head into recession if imbalances in the world's financial systems are not resolved.

    Rodrigo Rato: Current US deficit is a concern

    Rodrigo Rato said on Monday: "The debate on these imbalances should be taken very seriously because a disorderly resolution of the problem could spark a global recession which we don't want.

    "However, adapting to global demand in an orderly fashion is difficult and can't be achieved in a rush."


    The United States' current account deficit is an imbalance of particular concern and the country needs to work on boosting private saving and fiscal consolidation, but the flipside of the US deficit is the high current account surpluses being run by oil exporting countries, Japan, China and developing economies in Asia, Rato said.


    He said economies with current account deficits needed to reduce their dependence on global savings and countries with surpluses needed to lower their reliance on foreign demand.


    He also urged implementing measures that would boost domestic demand and strengthen the influence of market forces in the allocation of resources in developing Asian countries.


    Rato was writing ahead of a meeting of finance ministers from the Group of Seven industrialised nations and officials from the IMF and the World Bank in Singapore later this month.


    Rato underlined the importance of focusing on reducing global economic imbalances in upcoming multilateral discussions among officials from leading economies.

    SOURCE: Reuters


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