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IMF: Global recovery has begun

19 August 2009 11:33 (UTC +04:00)

Bakuâ€“ APA-Economics. The global recession is now over and a recovery has begun, Olivier Blanchard, the top economist for the International Monetary Fund, said Tuesday, MarketWatch reported.
The global recession has not been typical, and the recovery won’t be either, he said. "One should not expect very high growth rates in the recovery."
"The turnaround will not be simple," Blanchard wrote in an article released by the IMF. "The crisis has left deep scars, which will affect both supply and demand for many years to come." His article will be published by the IMF on Wednesday.
To an economist, the term "recovery" has a specific technical meaning: The economy is growing once again, but has not necessarily returned to its previous levels of output, wealth or employment. The economy is healing, but not yet healed.
Indeed, Blanchard said this recession has been so destructive that "we may not go back to the old growth path ... potential output may be lower than it was before the crisis."
Growth is coming for most countries, for at least the next few quarters, he said, but it won’t be strong enough to reduce unemployment for a while.
And the growth is still highly dependent on government stimulus from fiscal and monetary policies. Sustaining growth "will require delicate rebalancing acts, both within and across countries," he said.
"Sustained recovery in the United States and elsewhere eventually requires rebalancing from public to private spending," Blanchard said. Large fiscal deficits designed to stimulate the economy must be unwound.
The United States can’t rely on low interest rates to sustain the recovery, nor can it rely on consumer spending or investment filling the gap. Consumers are likely to save more in coming years. Businesses don’t need to invest much for the next few years, because so much of their capacity is idle.
"Sustained recovery is likely to require an increase in U.S. net exports and a corresponding decrease in the rest of the world, coming mainly from Asia," he said. China, for one, should increase its domestic demand.