The savings-conscious US consumer can no longer be counted on to drive the global economy and new sources of momentum will have to be found, the IMF head said.
IMF managing director Dominique Strauss-Khan, in an interview with the newspaper Le Monde yesterday, also urged G20 leaders convening in Pittsburgh, Pennsylvania, on Sept. 24 and Sept. 25 to approve measures to tighten financial system regulation.
He said the G20 was not acting “quickly enough” on the question of exorbitant bonuses taken by executives at major banks.
“The economy is recovering, great. But we have to remain cautious ... and not give the impression that the crisis is behind us,” he told the newspaper.
“We have emerged from the financial crisis” but continue to grapple with “economic” and “social” crises, he said.
“For the worker who will lose his job in November the crisis is not behind him — the crisis is ahead of him,” Strauss-Khan said, warning that an increase in unemployment would not be checked before the second half of next year.
He argued that global economic growth could no longer be expected to come from such macroeconomic imbalances as US indebtedness.
In the US, hard-hit by recession, “the household savings rate, which was practically zero, is now at 5.0 percent ... Good news for the deficits. But who will replace the US consumer to power global growth?” he asked.
He recalled that the US accounts for 25 percent of global output.
“The question of new sources of growth must be considered,” Strauss-Khan said, voicing doubts that emerging market countries would be able to provide the driving force behind worldwide momentum.
He also urged the US to maintain its economic support measures.
“With private demand still extremely weak, we could see another slide” in the world economy, he said.
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