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World economy on the road to fragile recovery - IMF

Updated: 09 Jul 2009
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The International Monetary Fund (IMF) says the global economy is beginning a slow recovery from the worst recession since World War II.

 

But the IMF warns that the global recession is not over and the recovery is still expected to be slow.

 

It predicts the world economy will shrink by 1.4 per cent this year, slightly worse than its earlier estimate.

 

IMF chief economist Olivier Blanchard said forces dragging down the economy were easing in intensity but those pushing it up were still weak, despite heavy government spending and central bank lending.

 

"This leads us to predict that while the world economy is still in recession, the recovery is coming but it is likely to be a weak recovery," Mr Blanchard told a news conference.

 

But the IMF's latest world economic outlook report has boosted the prediction for global economic growth next year to 2.5 per cent.

 

In a separate report, the IMF says financial conditions are improving faster than it expected, thanks largely to unprecedented action taken by central banks and governments.

 

"Although exiting now would be premature, I think it's fundamental that we devise credible plans that map where we're going in the medium-term and how we're going to get there," said Jose Vinals, director of the IMF's Monetary and Capital Markets Department.

 

He warned against complacency and said there was a danger of a setback if financial markets got too far ahead of economic recovery. Still, he said unprecedented policy intervention had reduced the risk of a systemic collapse.

 

SOURCE: - ABC/Reuters by North America correspondent Kim Landers, wires

 

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