Pranab cautions the world on 'fragile' global economic recovery

Written by: Abdul Nisar
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Washington, Oct.10 (ANI): The Union Finance Minister, Pranab Mukherjee, has stated that the global economic recovery is fragile and cautioned that emerging economies may not remain as resilient in the wake of any unexpected crisis.

Addressing at the International Monetary Fund and World Bank Group Development Committee Meeting, Mr. Mukherjee said, "Countries are recovering at different rates. Growth is well below potential. And the recovery is fragile. There is a constant danger of recovery being derailed by unexpected shocks."

The Union Minister sought to put across a word of caution, as he said, the world economy was passing through a lot of uncertainty.

He said, the financial and economic crisis was yet to run its full course and economies have yet to fully recover from its after-effects.

"Through coordinated action, we were able to avert a prolonged recession ...The prospects are, however, full of uncertainties. Recovery continues across the world, but it is uneven," Mr. Mukherjee stated.

Appreciating the remarkable resilience shown by developing nations in dealing with the crisis, Mr. Mukherjee said, "However, they have exhausted their policy buffers built up over the years and would not be able to show the same resilience in the face of another shock."

While the developed world has been witnessing fragile economic recovery after being hit hard by the financial meltdown, started by the sub-prime crisis, Asia is expected to drive the global growth, he stated.

He said, in fact, the International Monetary Fund (IMF) recently warned that the United States was staring at a sluggish recovery from severe recession in the face of weak consumer spending and high debt.

The growth in the world's largest economy slowed to 1.7 percent in the second quarter of this year from a 3.7 percent pace in the first quarter, and key indicators suggest "a weak recovery in coming quarters," the IMF had said.

He said that Europe, on the other hand, witnessed sovereign debt crisis in some of its countries, but that did not spread.

However, the World Bank warned that Eastern and Central European countries could face another economic slowdown if their Western neighbours cannot gain control of their finances.

On the other hand, IMF expects Asia to continue leading the global recovery.

"China and India will continue to lead the region's growth. For China and India, we project growth in 2010 at 10.5 percent and 9.7 percent respectively," the IMF Director for Asia and Pacific, Anoop Singh had said.

Mentioning that the impact of the crisis was going to last for decades beyond the crisis, Mr. Mukherjee termed it to be a a great cause for concern that an additional 64 million people had been pushed into poverty; that joblessness had increased; and that financial flows, although they had recovered from their lows, were still far below their 2007 levels.

"The achievement of the Millennium Development Goals has certainly suffered a setback. Today, we have a billion people suffering from acute hunger, a number unprecedented in history," Mr. Mukherjee.

Stressing on the need to restore the pace, Mr. Mukherjee said, "We need to put in place policies that expand our economies, stimulate investment, increase output and create jobs. We need programs that will address the educational and health needs of our people. We need mechanisms that will ensure that those who are adversely affected by this crisis are taken care of."

Mr. Mukherjee lauded the World Bank's role, as it played in addressing the fallout of the crisis.

"In fact, it is quite worrying that the Bank's annual lending will come down to a maximum of USD 15 billion from next year onwards," he said.

Mr. Mukherjee said innovative measures were needed to expand the bank's lending capacity

"We need strong multilateral buffers to face future crises, play a counter-cyclical role and help maintain development expenditures. For this, we need to quickly focus on further expanding the Bank's lending capacity through innovative measures. This may even require further capital enhancement," he said.

During his address, Mr. Mukherjee also called on the need to increase private inflows.

"The Bank needs to have an early warning system by which it can spot and respond quickly to an evolving crisis-be it food, fuel or economic. The mechanism should be backed by the resources and instruments so that when the situation arises, the Bank is not found wanting," the Indian Finance Minister stated. (ANI)

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