Thursday April 23, 06:38 PM
Global economic crisis 'far from over': IMF chief
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WASHINGTON (AFP) - International Monetary Fund chief Dominique Strauss-Kahn Thursday said the global economic and financial crisis "is far from over" and that the recovery will come from the United States.
"Despite some red lines and green lines" in the IMF's outlook on the global economy, "our belief is that the crisis is far from over," Strauss-Kahn said at a news conference, ahead of the IMF spring meetings in Washington this weekend.
"We still believe recovery can take place in the first semester (half) of 2010," he said, a day after the IMF published its semiannual World Economic Outlook report.
In the report, the IMF forecast the global economy would contract 1.3 percent this year, before recovering to sluggish growth of 1.9 percent in 2010.
"The beginning of the recovery has to come from the United States, and will come from the United States," the IMF managing director said.
Strauss-Kahn said that "we still have long months" of crisis, pointing to the 2.8 trillion dollars in US-originated losses for banks and other financial institutions estimated in the IMF's latest Global Financial Stability Report.
While the media focused on the IMF's extended total cost of the crisis, including European- and Japanese-originated losses, at more than four trillion dollars, he said, "the most important" figure was the 2.8 billion in US-originated losses because it is "in a time series" that shows a rapid increase in bad credit.
The head of the 185-nation institution called for stepped-up efforts to cleanse the "toxic assets" from the balance sheets of financial institutions.
"We are far from what we need," he said. "Already a lot has been done, but not enough," he said, "especially in the United States and the European Union."
He also cited Switzerland as "a big part" of the problem.
Strauss-Kahn acknowledged the political and technical difficulties of cleansing toxic assets from balance sheets.
But he said the IMF's vast experience with banking crises shows "you never recover before you complete the cleaning up of the balance sheet of the financial sector."
"The recovery in 2010 relies a lot upon the effort that still has to be made in this domain. So, I'm again asking on the eve of these meetings for more effort to be made in this direction."
The IMF estimates that the US, European and Japanese banks will have acknowledged only a third of their losses on soured assets between mid-2007 and 2010.
Strauss-Kahn welcomed the Group of 20 countries for now spending on economic stimulus an average of 2.0 percent of gross domestic product, in line with IMF recommendations.
"For 2009, I think the effort we have been asking for has been delivered."
The IMF and sister institution the World Bank will hold their annual spring meetings on Saturday and Sunday.
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