The IMF's second-in-command yesterday said delegates to the Group of 20 (G20) developed and emerging economies meeting in South Korea were confident that an economic recovery was under way despite lingering risks. "They're mainly confident that there's a moderate recovery under way globally," said John Lipsky, the IMF's first managing director, following meetings in Gwangju. "Obviously there are risks and challenges, but things seem to be moving more or less in line with our forecasts."
The cautiously upbeat assessment comes at what economists describe as a critical moment for the global recovery. The world economy started to grow again last year after shrinking in 2008, according to IMF figures, but fears of a return to recession have intensified lately because of stagnant job growth and slowing output in the US, coupled with worse-than-expected GDP numbers from Japan in the second quarter.
Unemployment in the US remains at about 9 per cent, according to payroll figures for last month released last week. The US commerce department said on August 25 that sales of new homes fell by 12.4 per cent in July compared with June, pushing the annualised rate of sales to their lowest level since 1963. Japan recently reported economic growth of just 0.1 per cent in the second quarter, which the country's leaders followed up with a major new stimulus package.
Ben Bernanke, the chairman of the US Federal Reserve, said last month new data suggested that a recovery in output and employment in the US was slowing to a weaker-than-expected pace due to slack consumer spending and low demand for housing. Nevertheless, he echoed the G20's reserved optimism for the remainder of the year, saying he continued to expect the US economy to grow, "albeit at a relatively modest pace".
"There was an agreement that the [global] recovery will continue even though the speed may slow from the level we thought of two to three months ago," Kim Jae-chun, the deputy governor of South Korea's central bank, said on Saturday, the first day of the G20 meetings that ended yesterday. Few of the leading Gulf economists polled by The National last week said they saw a double-dip recession in the US as likely.