World out of recession, says IMF


Istanbul : The world economy has pulled out of its worst recession since World War II and will stage a sluggish recovery in the coming year, the International Monetary Fund (IMF) said in an economic forecast released Thursday.

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But the IMF warned the recovery was largely due to massive public spending by governments. The underlying economy remains weak, unemployment will continue rising and the pace of the recovery will be slower than usual in coming years, according to the IMF’s semi-annual World Economic Outlook.

Overall, the world economy will shrink 1.1 percent this year before growing 3.1 percent in 2010. That compares to the IMF’s July forecast of a 1.4-percent contraction in 2009 and 2.5-percent growth the following year.

Growth in the following years will also remain sluggish. The IMF said the world economy will grow 4 percent on average between 2010 and 2014 – down from about a 5-percent average rate in the years before the crisis.

The recovery is being led by strong growth in emerging Asian powerhouses like China and India, while the US, Europe and Japan are just beginning to emerge from devastating recessions.

The world’s advanced economies will grow by 1.3 percent in 2010 – up from the IMF’s forecast of 0.6 percent in July – after shrinking a massive 3.4 percent this year. Developing countries will grow 4.7 percent in 2010 after their growth slowed to 1.5 percent this year.

Europe could face unemployment of nearly 12 percent by the end of 2011, while the US jobless rate will peak at 10 percent in 2010, the IMF said.

The IMF report was one of its rosiest since the world economy was plunged into a deep recession last year with the onset of the financial crisis.

Yet the recovery is both fragile and somewhat artificial: public spending has propped up many economies around the world over the past year, instead of private consumption. The IMF warned governments not to be duped into pulling back their support measures too early.

“Premature exit from accommodative monetary and fiscal policies seems a significant risk because the policy-induced rebound might be mistaken for the beginning of a strong recovery in private demand,” the IMF report said.