Striking a note of optimism about the global recovery following after one of the most serious recessions since the 1930s, the International Monetary Fund today said that the recovery had “evolved better than expected.”
In its just-released World Economic Outlook the Fund said that economic activity was recovering at varying speeds across nations, however, at a “tepid” in many advanced economies but “solidly” in most emerging and developing economies.
Emphasising the particularly positive news coming out of developing countries the influential report said that “countries such as Brazil, China, India, and Indonesia are already sustaining a strong rebound, even in the face of weak recovery in the advanced economies, quickly re-attracting capital flows.”
The Fund attributed this rebound to the absence of both long-lasting shocks to the financial systems of developing countries and of large increases in unemployment rates. As a result many of these countries were able to “deploy sizable fiscal and monetary stimulus.”
Reflecting the new concern about inflation, which the Reserve Bank of India recently moved to quell through an interest rate hike, the report said, “In various Latin American, Middle Eastern, and CIS economies, inflation slowed but remained relatively high throughout the cycle, and in India it rose strongly.”
Amongst advanced economies the IMF said policy support had been essential to “jump-start” the recovery. In particular monetary policy was highly expansionary and supported by “unconventional liquidity provision,” while fiscal policy had provided a major stimulus in response to the deep downturn. The Fund noted that among advanced economies, the United States was “off to a better start” than Europe and Japan.
World economy poised for further growth
Expressing cautious optimism for the prognosis of global growth the Fund argued that world economy would continue to recover “but at varying speeds across and within regions.” It said that global growth was projected to reach 4.5 percent in 2010 and 2011.
Advanced economies were now expected to expand by 2.5 percent in 2010 and 2011, following a decline in output of more than 3 percent in 2009, the IMF said, adding that growth in emerging markets would however be “over 6.5 percent during 2010–11,” following a modest 2.5 percent growth in 2009.
