World economy not out of the woods yet

Finance Minister Pranab Mukherjee today said the world economy was not out of the woods yet and there
was a need to calibrate the exit from fiscal stimulus.
We will, no doubt, need to rightly frame our exit policy considering our respectie economic situations
and push for structural reforms to enhance the potential growth,! he said addressing the first session of
"#$ Finance Ministers% and &entral 'ank "oernors% Meeting here.
Mukherjee said een though the risk of a global (double dip% recession might not be high, it was important
to acknowledge that the downside risks were eleated. )e said that in dealing with high soereign debt in
some economies, unemployment in adanced countries, olatility of capital flows, inflationary pressures in
emerging markets, and widening global imbalances, there was a danger of getting the monetary * fiscal
policy mix wrong during the exit process.
Macroeconomic indicators say that global growth in the second +uarter of this year has slowed down, and
there are headwinds to sustaining the global recoery. ,he recoery in adanced economies remains
fragile with high unemployment and sluggish household consumption.
-ndian economy grew at ... per cent during the first +uarter of #$/$0#$//. ,he goernment is projecting
the economy to grow at ..1 per cent this year. ,here are concerns arising from inflationary pressures, and
more importantly, from the uncertain external enironment. )oweer, with the strong domestic demand, a
stable financial system and growing inestor confidence we expect to remain on a high growth path,
Mukherjee said.
2arlier, talking to the reporters on board a special aircraft, he said although the 34 trillion in stimulus had
helped the countries, crisis was not yet oer.
5s the process of recoery had been slow in countries in 6orth 5merica and also there were uncertainties
in 2urope, the world leaders would hae to consider ways and means to oercome the present situation
and find the path forward, he added.
Is global economy out of the woods
CERNOBBIO (Italy): Is the global economy out of the woods? Two years after nearmeltdown!
w"th the #$ loo%"ng slugg"sh! e&u"ty mar%ets groggy and Euro'eans f"ght"ng a debt cr"s"s!
e('erts gathered "n Italy offered a generally gloomy outloo% es'ec"ally for the #n"ted $tates
and much of the "ndustr"al")ed world*
The doomsayers were led by New +or% #n",ers"ty econom"st Nour"el Roub"n"! who warned "n
boom"ng tones that -there "s a s"gn"f"cant r"s% of a doubled"' recess"on "n the #n"ted $tates- as
well as "n .a'an and many Euro'ean countr"es*
$ome of the assembled e('erts and leaders at the annual /mbrosett" 0orum on the shores of
1a%e Como were somewhat more u'beat: econom"st Edw"n Truman! a sen"or fellow of the
2eterson Inst"tute for Internat"onal Econom"cs! 'red"cted that -the most l"%ely global outloo% "s
sub'ar growth*-
But most a''eared to agree on a sober"ng array of bas"c 'roblems stand"ng "n the way of true
reco,ery:
3any of the growth dr",ers "n 'lace s"nce the colla'se of 1ehman Brothers are w"nd"ng u' or
ha,e ended! "nclud"ng not only the mass",e st"mulus s'end"ng but ta( brea%s! schemes such as
the -cash for clun%ers- 'rogram and for some countr"es l"%e Russ"a h"gh commod"ty 'r"ces*
The st"mulus deemed necessary to 4um'start mor"bund econom"es soon causes def"c"ts and
debt! u'sett"ng the mar%ets enough to s'ur auster"ty wh"ch underm"nes growth*
3ost of the world5s growth stems from a de,elo'"ng world led by Ch"na wh"ch "s so
de'endent on e('orts that "t needs the 6est to cont"nue to buy! and so w"ll suffer "f reco,ery "n
the r"ch world 'ro,es shortl",ed*
Euro'e cont"nues to lose com'et"t",eness 'artly because of the euro! wh"ch for all the
frett"ng o,er "ts d"' earl"er th"s year at the he"ght of the 7ree% debt cr"s"s rema"ns h"gh "n
'urchas"ng 'r"ce 'ar"ty terms ,ersus the #$ dollar*
The sector that "s w"dely seen as the s'ar% of the global recess"on #$ real estate has not
reco,ered! w"th housebuy"ng flat and the mortgage mar%et! w"th "ts related f"nanc"al
"nstruments! essent"ally st"ll "n ru"ns*
The 4obs '"cture "s not "m'ro,"ng and "n 'arts of the de,elo'ed world such as $'a"n! w"th
some 89 'ercent unem'loyment "t "s d"sastrous*
-Cond"t"ons "n the #$ labour mar%et are awful!- sa"d Roub"n"! who ga"ned celebr"ty for
'red"ct"ng the global colla'se of 899: when others were st"ll celebrat"ng the boom t"mes* ;e
added that e,en "f some #*$* growth "s ma"nta"ned "n com"ng &uarters "t w"ll be so low 'erha's
an annual")ed < 'ercent! wh"ch means 'er ca'"ta stagnat"on that -"t w"ll feel l"%e recess"on for
most 'eo'le*-
;ar,ard #n",ers"ty h"stor"an N"all 0erguson noted that s"nce 899< the #n"ted $tates has seen "ts
debtto7=2 rat"o double to >> 'ercent and that "t may well be headed toward the danger )one of
<99 'ercent* -Th"s "s a com'letely unsusta"nable f"scal 'ol"cy!- sa"d 0erguson* -2retty soon the
#*$* w"ll be s'end"ng more on debt ser,"ce than nat"onal secur"ty* *** That5s a t"''"ng 'o"nt for
any global 'ower*-
/mer"cans -4ust ha,e to go down "n the"r l","ng standards- after years "n wh"ch the"r l","ng
standards soared "n 'art based on fore"gn cred"t wh"ch "s no longer there!- sa"d #n",ers"ty of
3un"ch econom"cs 'rofessor ;ans6erner $"nn* .acob 0ren%el! Cha"rman of .2 3organ Chase
Internat"onal! urged the #n"ted $tates to re"n "n ent"tlements as 'art of a -'ol"t"cal deal- that
recogn")es real"ty*
Cha"r"ng a 'anel! CNBC anchor 3ar"a Bart"romo drew laughs by challeng"ng the scowl"ng
Roub"n" to come u' w"th -any good news*-
;e offered that -emerg"ng econom"es ha,e h"gh 'otent"al growth*-
But e,en that comes w"th a ca,eat: Roub"n" warned that world growth leader Ch"na was too
de'endent on e('orts to the struggl"ng 6est and 'red"cted that w"th"n a year "ts econom"c growth
w"ll be o,erta%en by Ind"a! a huge nat"on much more rel"ant on "ts domest"c mar%et for
de,elo'ment*
The lead"ng Ch"nese delegate to the forum! Cheng $"we"! seemed to agree w"th the cr"t"c"sm*
-6e must change our "n,estment 'attern from "n,estment dr",en to rely"ng more on domest"c
consum't"on!- sa"d Cheng! a former to' Ch"nese off"c"al who cha"rs the Ch"na $oft$c"ence
Research $oc"ety among other 'os"t"ons*
6hat about 7reece! whose neardefault four months ago rattled the ner,es of "n,estors around
the globe?
-7reece w"ll not ma%e "t!- sa"d $"nn* ;e sa"d the world can e"ther subs"d")e /thens "ndef"n"tely!
force a degree of auster"ty that actually r"s%s -c","l war!- or "n what he suggested was the least
bad o't"on encourage 7reece to restore "ts drachma currency des'"te the domest"c ban%"ng
colla'se that could well result*
$"nn noted that bond s'reads the d"fference between the cost of borrow"ng for troubled
countr"es such as 7reece and sol"d ones such as 7ermany ha,e sw"ftly returned to the startl"ng
le,els that 'receded the 7ree% ba"lout "n 3ay*
Truman ended h"s remar%s on a h"gh note! not"ng that "n recent &uarters5 -#$ 'roduct","ty
"ncrease has been s"gn"f"cant*-
But that de,elo'ment! wh"le good for com'an"es5 bottom l"nes! "s also a reflect"on of the stagnant
labor mar%et and the shr"n%age of 'ayrolls as f"rms ho'e to 'roduce as much as before w"th
fewer and more 'roduct",e staff*
In 'erha's an "llustrat"on of that 'sychology! se,eral hundred bus"ness leaders at the forum were
as%ed for the"r 'ro4ect"ons on the"r own com'an"es5 'ros'ects* ?ot"ng electron"cally! some @9
'ercent 'red"cted a r"se "n turno,er by the end of 89<9 and almost half 'red"cted a r"se "n the"r
f"rms5 "n,estment*
But less than a th"rd saw a chance for new h"r"ngA almost half saw no change and about a
&uarter 'red"cted e,en more reduct"ons*
Read more: Is global economy out of the woods? The T"mes of Ind"a
htt':BBt"mesof"nd"a*"nd"at"mes*comBbus"nessB"nternat"onalbus"nessBIsglobaleconomyoutofthe
woodsBart"cleshowB>C:@CD:*cmsE"())<FyBG8s1<
International Monetary Fund head Dominique Strauss-Kahn said on Sunday the world
economy was not "out of the woods" despite a faster recovery in developing and emerging
countries than earlier forecast.
e told reporters during a visit to the country that although glo!al recovery was "resuming
sooner than e"pected# private demand was still not strong enough to signal the end of the
prolonged recession e"perienced !y the world economy.
"$ou see growth resuming almost everywhere !ut that almost everywhere these growth
figures are related to pu!lic support and private demand remaining rather wea% and not
strong enough. &ntil private demand is sustaina!le to provide growth it will !e difficult to
say the crisis is over#" he added.
'he IMF sharply raised its estimates !ac% in (anuary# predicting that the world economy
would e"pand !y ).* per cent in +,-,# much higher than the ).- per cent it pro.ected last
/cto!er# with the pace pic%ing up to 0.) per cent ne"t year.
"'he recovery is coming sooner than e"pected. 1ut we are not out of the woods and we have to
!e cautious#" he added.
2redictions for recovery have !een improving steadily since last year in tandem with an
e"plosive stoc% mar%et recovery.
1ut much of the &S economy3s recovery from the most !rutal downturn since the -*),s has
!een driven !y government stimulus and !usinesses !eing less aggressive in reducing
inventories.
'his has raised concerns that growth could stutter later this year when the !oost from the two
sources fades# given tepid consumer spending and high unemployment.
Strauss-Kahn# a former French finance minister# said that although a dou!le dip could not !e
ruled out# the IMF did not forecast one.
'he head of the IMF refused to !e drawn into commenting on the ne"t 4orld 5conomic /utloo%
!efore it was released in "ten days" he said.
Strauss-Kahn also warned of the... ris%s in a premature recovery that could prompt governments
to retreat from pu!lic stimulus policies too early and thus "shooting themselves in the foot".
6long with concerns over sovereign de!t in the euro 7one# Strauss-Kahn added that a third ris%
was the "huge amount of capital inflows that could go to countries such as 1ra7il and Indonesia
that would create !u!!les"....