IMF lifts global growth forecast

The worst recession in several decades is moderating but it would be too early to withdraw the slew of government measures aimed at lifting the global economy, says a new report released by the International Monetary Fund (IMF). "The recovery is coming but it is likely to be a weak recovery," said Olivier Blanchard, the IMF's chief economist at a press conference. "It is too early to implement exit strategies," Blanchard said. The IMF raised its forecast for 2010 global growth to 2.5% compared with its forecast for a 1.9% rate in April. The global recession should end in the second half of 2009, the New York-based agency said. The advanced economies will lag, with the recession ending in the middle of 2010, it added.

But this higher growth rate still is not strong enough to stop unemployment from rising, Blanchard said. The IMF said that it would be too soon to end the various government-backed stimulus measures. There is nothing wrong in drawing up exit strategies but they should not be implemented, it said. "The recovery is fragile. Policymakers must continue the strong monetary, fiscal and financial policies that they have put in place. If they do not, there is a great risk that the recovery falters," Blanchard said.

Asia will continue to outperform the rest of the world but it cannot decouple from the weakness in the US and Europe, he said. A gradual recovery in the US remains on track, the IMF said, adding that the euro-area growth will lag the other areas. The risks to the global financial system have moderated from April, the IMF said. Risks of another Lehman Brothers like crisis have diminished, the agency said. But financial conditions remain tight. "Banks are still not in great shape and continue to retrench and tighten lending standards," Blanchard said.