IMF: Economic recovery has begun

Global body's chief economist warns countries must ensure upturn is sustainable.

    Blanchard warned that the crisis would affect supply and demand 'for many years to come' [EPA] 

    'World recovery'

    He said US consumption, which accounts for about 70 per cent of the US economy and a large chunk of global demand, would remain below pre-crisis levels for a long time.

    US householders are struggling to cope with trillions of dollars in losses from the falling housing and stock markets and in the future may become more careful savers, he said.

    He added that emerging Asian countries, especially China, would have to play a big role in sustaining the recovery.

    "From the point of view of the United States, a decrease in China's current account surplus would help increase demand and sustain the US recovery," he said.

    "That would result in more US imports which would help sustain world recovery."

    But in order for China to boost domestic demand, it will need to provide a stronger social safety net and increase household access to credit, which will encourage its consumers to save less and spend more.

    In the short term, Blanchard said most countries would see positive economic growth for the next few quarters, although probably not enough to reduce unemployment, which is not expected to crest until some time next year.

    SOURCE: Agencies


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