The International Monetary Fund (IMF) has released its latest update of the World Economic Outlook and the Global Financial Stability Report. At a press conference today, a number of IMF officials spoke to the reports. Present were Olivier Blanchard, Economic Counsellor and Director of Research; José Viñals, Financial Counsellor and Director of the Monetary and Capital Markets Department; Jan Brockmeijer, Deputy Director of the Monetary and Capital Markets Department; and Jörg Decressin, Assistant Director of the Research Department’s World Economic Outlook.
In opening the press conference, Mr. Blanchard pointed out that global prospects have improved and that the world economy is recovering. “We project world growth to be about 4 percent in 2010, 4.3 percent in 2011. The recovery remains, however, largely policy-driven and it is increasingly a multi-speed recovery. We have, in a sense, moved from a remarkably synchronized global downturn to a more differentiated global recovery.”
Mr. Vinals spoke to the global financial system where, he said, we see the risks and the challenges that policymakers face as they attempt to address these risks, and the issues involved in putting a new regulatory framework into place. “The good news is that there has been an overall further reduction in systemic risks. Notwithstanding the recent sell-off, financial markets have recovered strongly since their troughs, risk appetite has returned, equity markets have improved, and capital markets have reopened. This owes much to the encouraging signs of a global economic recovery, and to the significant support being provided by macroeconomic and financial policies."
Synopsis:
World Economic Outlook: A Policy-Driven, Multispeed Recovery
The global recovery is off to a stronger start than anticipated earlier but is proceeding at different speeds in the various regions. Following the deepest global downturn in recent history, economic growth solidified and broadened to advanced economies in the second half of 2009. In 2010, world output is expected to rise by 4 percent. This represents an upward revision of ¾ percentage point from the October 2009 World Economic Outlook. In most advanced economies, the recovery is expected to remain sluggish by past standards, whereas in many emerging and developing economies, activity is expected to be relatively vigorous, largely driven by buoyant internal demand. Policies need to foster a rebalancing of global demand, remaining supportive where recoveries are not yet well sustained.
Global Financial Stability Report: Financial System Stabilized, but Exit, Reform, and Fiscal Challenges Lie Ahead
Systemic risks have continued to subside as economic fundamentals have improved and substantial public support remains in place. Despite improvements, financial stability remains fragile in many advanced countries and some hard-hit emerging market countries. A top priority is to improve the health of these banking systems so as to ensure the credit channel is normalized. The transfer of financial risks to sovereign balance sheets and the higher public debt levels also add to financial stability risks and complicate the exit process. Capital inflows into some emerging market countries are beginning to raise concerns about asset price and exchange rate pressures. Policymakers in these countries may need to exit earlier from their supportive policies to contain financial stability risks. For all countries, the goal is to exit from the extraordinary public interventions to a global financial system that is safer, but retains the dynamism needed to support sustainable growth.
WEO