Who to believe?
World Economy not so bad despite crisis,says IMF
SAO PAULO - The world financial crisis could still deal
some nasty blows to emerging countries, but swift action by central
banks in advanced economies meant overall "things aren't going that
bad," IMF chief Dominique Strauss-Kahn said Sunday.
Speaking after a meeting here of finance ministers and central
bankers from the G20 group of developed and developing nations,
Strauss-Kahn said discussions were dominated by the sharp downward
revision of economic growth around the world.
"For the first time in the postwar period we have a negative
forecast for growth for advanced economies, and also a large
revision for emerging countries," he told reporters.
"Not only that, there are still some very important downside risks
that have to do with shortage of capital in emerging
markets."
Foreign capital inflows that many emerging markets, such as those
in Latin America and eastern Europe, had been depending on for
their economic growth are "drying up," he noted, saying: "The whole
picture is a rather gray picture."
Nevertheless, those officials at the meeting, who pull the levers
of the world's major economies, were not panicking, Strauss-Kahn
said.
That was because of quick action by many economic heavyweights --
most recently China, which on Sunday announced a 568-billion-dollar
stimulus package -- and the decision by central banks to inject
liquidity into the banking system.
The IMF president said he was "happy" with China's move, and hailed
recent actions by the United States and Europe.
"Things aren't going that bad, even though markets are frozen and
there are other problems, but it has been very well done by the
different central banks," the IMF president said.
"I don't see at all the central bankers being afraid. They are
active and I think that is a good thing.
"One of the main candid and very simple conclusions of the last
period is that when you take the right action in public policy it
has an influence on the real economy, and that's exactly what we're
seeing now."
Notwithstanding the words of optimism, Strauss-Kahn said caution
still had to be held on to.
Asked about divergences within the G20 -- notably US resistance to
EU calls for deep reform of the financial system -- Strauss-Kahn
referred to the G20 summit in Washington next Saturday of that
body, saying: "If there was already a single voice you wouldn't
need a meeting."
He declined to predict an outcome of that summit.
"When you have a heads of state and heads of government meeting you
can never know what the outcome will be."
Efforts by Brazil and other emerging countries to portray the IMF
as badly in need of an overhaul, and the possibility of the G20
superseding it as a global financial supervisor were overstated he
said, observing that the IMF was more international than even the
G20 and packed unparalleled expertise.
He also said the IMF had sufficient funds to handle the current
manifestation of the crisis, though that could change.
"This is probably the first global crisis and from the point of
view of the current situation, the resources of the IMF are
probably enough. But tomorrow we don't know what's going to
happen," he said.
