Fri, Oct 05, 2012 - Page 15 News List

Economy will take decade to recover: IMF economist

The Guardian

The IMF’s chief economist has warned that the global economy will take a decade to recover from the financial crisis, as the latest snapshot of the UK economy suggested that growth in the third quarter would be at best anemic.

Olivier Blanchard said he feared the eurozone crisis, debt problems in Japan and the US, and an economic slowdown in China meant that the world economy would not be in good shape until at least 2018.

“It’s not yet a lost decade, but it will surely take at least a decade from the beginning of the crisis for the world economy to get back to decent shape,” he said.

Blanchard made his comments on a Hungarian Web site, Portfolio.hu, ahead of an IMF meeting scheduled for next week in Tokyo.

Germany is expected to defend its handling of Europe’s debt problems at the meeting, but Blanchard said there was more that Europe’s largest economy could do to support Spain and other struggling eurozone nations.

In particular, Blanchard urged Berlin to accept a rise in inflation and wages that would make it less competitive with its trading partners.

He said there was no risk of hyperinflation in Europe.

Higher inflation in Germany, though, would be beneficial: A somewhat higher inflation rate in Germany should simply be seen as a necessary and desirable relative price adjustment, he said.

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