IMF chief warns against premature exit from stimulus steps
Sunday, 6 September 2009
FE Report
International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn said stimulus measures adopted to combat the global crisis should be withdrawn only when the economic recovery has taken hold and unemployment is set to decline.
He was delivering the 2009 Bundesbank Lecture Friday in Berlin, said an IMF press release.
While acknowledging that the global economy appears to be emerging from the worst financial and economic crisis in the post-war period, Mr. Strauss-Kahn emphasised that the recovery will be sluggish and that a jobless recovery remains a risk.
"I am concerned about the social and economic costs of high unemployment, which will persist even as financial markets and output stabilises," he said.
Given the fragility of the recovery, he warned, "Policymakers should err on the side of caution as they decide when to exit from their crisis response policies." He added, however, that governments should develop their exit plans now so that they are able to build public support and act when the time is right.
Mr. Strauss-Kahn underlined that international policy coordination has been an essential part of the response to the crisis and that "coordination of exit strategies will be just as important." Thanks to concerted and forceful policy actions, the crisis had been contained, he said.
He focused on three policy areas--identifying new sources of growth, reforming the financial sector and strengthening the international monetary system-- essential to ensure a sustainable recovery.
On the demand side, "the baton will eventually need to be passed from the public to the private sector," he said. He also called for a global rebalancing of demand across countries, which would require strong policy actions -- including fixing the financial system in advanced economies and boosting domestic spending in emerging Asia.
International Monetary Fund (IMF) Managing Director Dominique Strauss-Kahn said stimulus measures adopted to combat the global crisis should be withdrawn only when the economic recovery has taken hold and unemployment is set to decline.
He was delivering the 2009 Bundesbank Lecture Friday in Berlin, said an IMF press release.
While acknowledging that the global economy appears to be emerging from the worst financial and economic crisis in the post-war period, Mr. Strauss-Kahn emphasised that the recovery will be sluggish and that a jobless recovery remains a risk.
"I am concerned about the social and economic costs of high unemployment, which will persist even as financial markets and output stabilises," he said.
Given the fragility of the recovery, he warned, "Policymakers should err on the side of caution as they decide when to exit from their crisis response policies." He added, however, that governments should develop their exit plans now so that they are able to build public support and act when the time is right.
Mr. Strauss-Kahn underlined that international policy coordination has been an essential part of the response to the crisis and that "coordination of exit strategies will be just as important." Thanks to concerted and forceful policy actions, the crisis had been contained, he said.
He focused on three policy areas--identifying new sources of growth, reforming the financial sector and strengthening the international monetary system-- essential to ensure a sustainable recovery.
On the demand side, "the baton will eventually need to be passed from the public to the private sector," he said. He also called for a global rebalancing of demand across countries, which would require strong policy actions -- including fixing the financial system in advanced economies and boosting domestic spending in emerging Asia.