Friday, October 02, 2009
The global economy will grow next year, but it will be a sluggish recovery that could lose momentum if policymakers start reversing the unprecedented stimulus measures too soon, the International Monetary Fund (IMF) said in its latest World Economic Outlook. Compared with July's outlook, the IMF sees better growth in 2010 due to strong public policies that have supported demand and all but eliminated fears of a global depression. Still, the outlook is for a subdued recovery, well below the growth rates achieved before the global crisis. There is a significant risk of a reversal, the IMF said. "The main short-term risk is that the recovery will stall," according to the latest IMF forecast. "Premature exit from accommodative monetary policy 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." Central banks in advanced economies will need to keep interest rates low for a while, the IMF said. "Fiscal stimulus needs to be sustained until the recovery is on a firm footing and may need to be amplified or extended beyond current plans if downside risks to growth materialize," it added.