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News Analysis: For global recovery, a laundry list of risks

English.news.cn   2010-10-09 06:52:08 FeedbackPrintRSS

 
This IMF photo shows International Monetary Fund's Chief Economist Olivier Blanchard as he presents the World Economic Outlook at the IMF Headquarters in Washington, DC., capital of the United States, Oct. 6, 2010. Rich and emerging economies must dramatically change the way they trade with each other or risk throttling the global economic recovery, the International Monetary Fund warned on Wednesday.(Xinhua/AFP Photo)
By Matthew Rusling

WASHINGTON, Oct. 8 (Xinhua) -- More than two years since the onset of the worst recession since the 1930s, advanced economies are starting to revive -- at a snail's pace.

While respectable growth is expected of the global economy -- nearly 5 percent this year and more than 4 percent next year -- demand is still weak in many advanced countries and unemployment still lingers at or near the double digits in both the United States and the Euro zone, according to the International Monetary Fund (IMF)'s World Economic Outlook released on Wednesday.

While a rebound is proceeding, experts fear any number of factors -- from debt consolidation to anti-trade sentiment -- could damage the still fragile recovery.

FISCAL CONSOLIDATION

According to the IMF, the main challenge for advanced economies is fiscal consolidation.

"What is essential here is not to so much to phase out fiscal stimulus now, but to offer a credible medium term plan for debt stabilization, and eventually for debt reduction," said the IMF's chief economist Olivier Blanchard at a press briefing on Wednesday.

Still, many will be reluctant to cut spending if growth is weak, and there are risks in cutting spending too soon.

Dean Baker, co-director of the Center for Economic and Policy Research, said the greatest risk to the recovery is the push to austerity in much of Europe and even in the United States, as the end of the stimulus will be contractionary.

"This could very well upend an extremely weak recovery," he said.

Editor: yan

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