The World Economic Outlook (WEO) that presents the International Monetary Fund (IMF) staff's analysis and projections of economic developments and it is usually prepared twice a year, rejected on Wednesday forecasts for either a rapid V-shaped recovery saying that the recovery will most likely be “weak by historical standards” and warned there were many obstacles to sustained rapid growth and that only a thorough restructuring of the financial system could prevent a return to crisis.
The economic crisis, which resulted in the deepest global recession since the Second World War, has led to a permanent loss of output, the IMF said. Most economies now have a large amount of spare capacity which is likely to keep inflation low, despite the extraordinarily expansionary monetary and fiscal policies undertaken by central banks and governments around the world.
Few notes from report’s executive summary:
After a deep global recession, economic growth has turned positive, as wide-ranging public intervention has supported demand and lowered uncertainty and systemic risk in financial markets. The recovery is expected to be slow, as financial systems remain impaired, support from public policies will gradually have to be withdrawn, and households in economies that suffered asset price busts will continue to rebuild savings while struggling with high unemployment. The key policy requirements remain to restore financial sector health while maintaining supportive macroeconomic policies until the recovery is on a firm footing.
However, policymakers need to begin preparing for an orderly unwinding of extraordinary levels of public intervention. The global economy appears to be expanding again, pulled up by the strong performance of Asian economies and stabilization or modest recovery elsewhere. In the advanced economies, unprecedented public intervention has stabilized activity and has even fostered a return to modest growth in several economies. Emerging and developing economies are generally further ahead on the road to recovery, led by a resurgence in Asia. The recent rebound in commodity prices and supportive policies are helping many of these economies……….
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