Global economic recovery still in fragile zone: IMF chief

The theme is still cautiously optimistic, despite the numbers from the U.S. What we are seeing in the U.S. is a statistical recovery and a human recession. This suggests that the policies to contain the economic collapse have been successful. My judgmentand most peoples judgmentwill be that GDP growth will continue at a moderate rate at least for the next several quarters, said Larry Summers, Economic Adviser to the U.S. IMF’s Dominique Strauss-Kahn said Asia is leading the world out of recovery, but though growth is coming back faster than expected its still fragile.

The consensus from a phalanx of policymakers around the world was that the global recovery is still very delicate , and Asia and emerging markets are zipping back to recovery much faster than the developed economies. Planning Commission deputy chairman Montek Singh Ahluwalia told the gathering, Asia has weathered this crisis …. We would hope in coming years we will move from 7.5% to over 8% next year then get back into 9%. Its going to be domestic investment replacing what has otherwise been export demand. I don’t think the deficit will be more than 2.5% of GDP. In addition, Deputy Governor of China’s Peoples Bank Zhu Min added that the focus in China will shift to a more balanced growth, and to the aim is to boost consumption growth and domestic demand hopefully the international environment is good, he said.

At one level, central bankers, private bankers and economic ministers met for an extremely private chat about what to do about banking reforms, and while Davos is not a venue for decisions, it seems, from reports, everyone agreed that something will be done. Up the road, trade ministers met for a chat about the future of the WTO. The Indian delegation, though somewhat depleted, was still going strong, and the afternoon session on Indias future growth strategy was packed to the back of the hall. This year though, the annual gathering at Davos has left many a bit confused, with no real dominant theme emerging.

Source: Excerpted from The Economic Times, January 31, 2010