IMF sees economic crisis getting worse, others expect recovery
The head of the International Monetary Fund told a gathering Monday in Kazakhstan that the worst of the financial crisis was yet to come. This comes less than a week after a survey of economists found that most expected the recession to end in September followed by a "mild" recovery.
International Monetary Fund chief Dominique Strauss-Kahn threw cold water on some of the optimism of the G8 meeting in Italy where as Reuters noted the eight finance ministers "described their economies in the most positive terms since the collapse of U.S. bank Lehman Brothers nine months ago heightened the world's worst financial crisis since the Great Depression of the 1930s."
U.S. Treasury Secretary Timothy Geithner is worried that his fellow finance ministers may see things too positively. Many finance ministers are starting to discuss "winding down" their stimulus programs. In his remarks at the G8, Geithner argued that it was too early to shift policy. "These early signs of improvement are encouraging, but the global economy is still operating well below potential and we still face acute challenges," the AP quotes Geithner as saying.
Many government and business officials agree with Geithner, arguing that the stimulus packages are still needed.
For instance, French media is reporting that the government plans to add an additional 3.5 billion euros ($4.92 billion) into stimulus measures earmarked for 2010 and plans to increase its public budget deficit forecast for 2009, according to Reuters. A U.K. business group has said that a sustained recovery is not assured even though it projects the country will pull out of a recession ahead of expectations. South Korean Finance Minister Yoon Jeung-hyun also argued it was too early to consider reversing stimulus policies.
Nonetheless, Strauss-Kahn sees more reasons to be pessimistic than optimistic.
"Their (G8) stance is that we are beginning to see some green shoots but nevertheless we have to be cautious," he said. "The large part of the worst is not yet behind us."