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World recovery is still fragile: IMF

business Updated: Apr 23, 2010 12:18 IST

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The International Monetary Fund (IMF) has said the world is still a dangerous place and the recovery, though sooner than expected, is still fragile.

"The world is still a dangerous place and I would not like that too many people have in mind that the crisis is over, that everything is behind us, and that we can go back to business as usual," IMF Managing Director Dominique Strauss-Kahn said at a news conference in Washington on Thursday.

Strauss-Kahn said there are several challenges that need to be met.

"The first is that in a number of countries unemployment continues to rise and so we cannot in any way assume that the crisis is behind us.

In some countries, not in all, and some advanced countries, unemployment continues to rise," he said.

The second challenge, he said, was that the recovery, though certainly there, is fragile within the G-7, and among the advanced countries in general.

"So long as private demand remains what it is, we know that public policy will have to remain vigilant for the crisis to move on to stronger terrain," he said.

Observing that the risks of future crises remain latent, he said there is, of course, also the question of public indebtedness.

"I would like to underscore that our judgment here at the IMF is that for the advanced countries the ratio of debt to GDP before the crisis and to 2014 will go from 14 per cent. So, there is an economic slowdown," the IMF chief said in response to a question.

He said because of the stimulus, there has been more growth and that has led to less indebtedness than would otherwise have been the case.

"But that does not mean that we must not in any event continue to move toward more sustainable levels of indebtedness," he said.

Strauss-Kahn said in advanced economies, unemployment is still very high and in some countries still rising, that private demand is still weak, and the financial sector is still not repaired.

"When we look at emerging countries, the main concern is about capital inflows because of the huge amount of liquidity available in the global economy, and the fact that there is some reluctance to invest in advanced economies--Europe, United States, even Japan--so huge capital is going into emerging countries, creating risks of asset price bubbles and different kinds of risks linked to this kind of capital inflows," he said.