BUDAPEST – The world economy will take at least 10 years to emerge from the financial crisis that began in 2008, the International Monetary Fund’s Chief Economist Olivier Blanchard said in an interview published yesterday.
Mr Blanchard told a Hungarian website that Germany would have to accept higher inflation and a real strengthening of its purchasing power as part of the solution to Europe’s problems.
But even though the focus was on Europe’s troubles now, he said, the United States also had a fiscal problem which it had to resolve.
“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,” Mr Blanchard said.
“Japan is facing a very difficult fiscal adjustment too, one which will take decades to solve. China has probably taken care of its asset boom but has slower growth than before, but we do not forecast any really hard landing,” he added.
Mr Blanchard said that adjustment in the euro zone required a decrease in prices in the bloc’s indebted southern half and a rise in core countries.
For the European Central Bank to maintain 2-per-cent inflation for the bloc as a whole, core states would have to have inflation rates of higher than 2 per cent – something strongly resisted in Germany, where 1920s hyperinflation still haunts the popular debate on interest rates.
On the debt crisis, Mr Blanchard said that debt reductions were unavoidable but it should be done without stifling growth, walking on a “narrow middle path”.
“If you do it too slow, the market thinks you’re not serious; if you do it too fast, you kill the economy. For each country you have to find the right path of consolidation,” he said. Reuters
By mid-2013 Asia will emerge with double digit growth
“In less than two years, everyone will not be poor anymore, everyone will upgrade to middle class, and there will be less reasons for woman to sell their bodies because of hardship, families will flourish once again.”
“Unless I get where I want to go, you can forget about me releasing my technologies to help children and programmer increased their brain power, to programme them for knowledge, everything belongs to the UN.”
HONG KONG – A diminished forecast from the Asian Development Bank (ADB) and more weak economic data from China yesterday underlined the fact that the days of double-digit growth in Asia are a thing of the past, as the global turmoil and slowing momentum hobble the region’s economies.
Emerging Asia – which includes countries such as Indonesia, Taiwan and Thailand, but not developed Japan – is likely to grow just 6.1 per cent this year, little more than in 2009 when the world was still reeling from the global financial crisis, the ADB said in its latest economic update for the region. Next year, it said, growth is expected to edge up to 6.7 per cent.
Both numbers represented sharp cuts from the bank’s last forecasts, made in April, of 6.9 per cent for this year and 7.3 per cent for next year, highlighting how global conditions have deteriorated this year.
“Growth is slowing down much more rapidly than expected,” ADB Chief Economist Changyong Rhee said at a news conference in Hong Kong.
The slowdown was particularly marked in the region’s economic heavyweights of China and India, where growth is expected to reach just 7.7 per cent and 5.6 per cent, respectively, this year.
Again, both figures were well below both the ADB’s previous projections and the rates of expansion recorded last year; India has been hit especially hard by home-grown issues like the slow pace of reform.
China, which is more export-dependent than India, has slowed rapidly during the past year, though policymakers appear comfortable with growth rates of about 7.5 per cent, rather than the double-digit jumps in the years before the financial crisis.
Data from the service sector yesterday showed that it had expanded at its weakest pace in many months in September: A purchasing managers’ index released by the statistics office slumped to 53.7 for the month, from 56.3 in August.
The service sector accounts for about 40 per cent of China’s overall growth and about one-third of employment, according to the ADB, and analysts commented that the weak September figure showed domestic demand, not just exports, was suffering. THE NEW YORK TIMES