View Full Version : IMF Says Risks to Global Economy Have Risen ‘Significantly’

8th June 2010, 07:13 PM
June 9 (Bloomberg) -- Risks to the global economic outlook have “risen significantly” and policy makers have limited room to provide support to growth, International Monetary Fund Deputy Managing Director Naoyuki Shinohara said.

Most advanced economies are experiencing a “subdued” recovery, Shinohara said in remarks prepared for delivery in Singapore today. “A key concern is that the room for continued policy support has become much more limited and has, in some cases, been exhausted.”

Shinohara’s remarks come days after finance chiefs from the Group of 20 diverged on prescriptions for sustaining the global recovery. U.S. Treasury Secretary Timothy F. Geithner called on Japan and European countries with trade surpluses to boost domestic demand, while Europe’s representatives said reining in budget deficits was the top priority.

As advanced economies suffer stunted recoveries, Asia will continue to lead the world economic rebound, according to Shinohara, the former top currency official at Japan’s Ministry of Finance. That brings its own challenges, with increasing capital inflows and the risk of overheating if policy makers fail to take “appropriate” action, he said.

Asia’s rebound is outpacing the rest of the world as companies from Nissan Motor Co. to Taiwan Semiconductor Manufacturing Co. increase exports and domestic spending strengthens.

Some of the region’s central banks have started to withdraw monetary stimulus to stem inflation and asset bubbles while others are reluctant to increase borrowing costs on concern the European debt crisis may thwart the global economic recovery.

“After nearly two years of global economic and financial upheaval, shockwaves are still being felt, as we have seen with recent developments in Europe and the resulting financial market volatility,” Shinohara said. “The global outlook remains unusually uncertain and downside risks have risen significantly.”