By Clarissa Batino and Francisco Alcuaz Jr.
Oct. 7 (Bloomberg) -- Growth in Asia will prevent the world's economy from sliding into a recession, said Michel Camdessus, former managing director of the International Monetary Fund.
``Thanks to the dynamism of Asia, the global economy will avoid recession,'' Camdessus, 75, said in a speech in Manila today. ``The U.S., Europe and Japan will suffer this year and next from a severe slowdown.''
World economic growth stumbled in the last quarter and will hover around zero through the fourth quarter and the first three months of 2009, meriting the description of a ``mild recession,'' JPMorgan Chase & Co. said in a report yesterday. UBS AG predicts expansion worldwide of 2.2 percent next year, below the 2.5 percent level they view as a downturn.
Camdessus headed the IMF during the Asian financial crisis a decade ago, when the fund arranged over $100 billion of loans to Thailand, Indonesia and South Korea after their currencies collapsed. In return, governments were forced to cut spending, raise interest rates and sell state-owned companies.
The IMF will cut its global economic-growth forecast ``pretty significantly'' this month as the financial crisis throttles lending, Managing Director Dominique Strauss-Kahn said Oct. 4. The fund estimated global growth of 4.1 percent for 2008 and 3.9 percent in 2009.
``It certainly looks like there will be a global recession,'' said David Cohen, an economist at Action Economics in Singapore. ``The data and situation around the world over the past week has taken a turn for the worse.''
`Monetary Complacency'
The global economy will probably grow 3 percent, matching the pace of the last decade, and policy makers need to remain vigilant against the threat of inflation, leaving no room for ``monetary complacency,'' Camdessus said.
``We shouldn't lose sight of the fact that inflation is a problem now in the world together with the financial crisis,'' he said. ``You could never relax and believe inflation is over for long.''
Australia's central bank today cut its benchmark interest rate by one percentage point, the most since a recession in 1992, triggering a rebound in Asian stocks on speculation other countries will follow to unlock credit markets. Banks around the world have been hoarding cash, driving up lending rates, even as central banks including Australia's pump money into the financial system.
``It's a slightly different experience now than we had back in 1997 and 1998,'' said Cohen at Action Economics. ``Now the U.S. dollar is firmer and so is the Japanese yen. Even with the problem right now in the U.S. and Japanese economies, they don't have to worry about cutting interest rates if they want to.''
Scapegoats
Critics said the IMF's policies during the Asian crisis deepened the region's recession, and the IMF said in 1999 it ``badly misgauged'' the severity of the collapse, acknowledging its fiscal prescriptions for the three countries were too harsh.
``There were plenty of scapegoats, I was one among others,'' Camdessus said. Still, broadening the responsibilities of the IMF beyond balance of payments and monetary policy ``could have prevented the present crisis.''
The U.S., Europe and Asia should jointly take the lead in reforming global markets, he said. Global markets may recover before the end of next year with work by ``all countries with proper coordination.''
``I don't look for regulation that would stifle flexibility but we cannot have these sectors produce toxic products unregulated,'' Camdessus said. ``This is a must.''
To contact the reporter on this story: Francisco Alcuaz Jr. in Manila at falcuaz@bloomberg.net; Clarissa Batino in Manila at cbatino@bloomberg.net
Posts
No comments:
Post a Comment