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Gradual exchange rate adjustment needed
(Xinhua)
Updated: 2009-11-19 09:54 Global economic recovery There are signs that the global recession has bottomed out and some economies have begun to show positive growth again. However, the year of 2009 as a whole will still see negative growth in the world economy. Hawksworth forecast that the global growth will return in a positive way, maybe 2 percent, next year. That is mainly because the global economy has been supported by the fiscal stimulus and the loose monetary policy. For example, the interest rates have been pushed almost to zero in most of the major economies. The economist did not show much optimism over the current recovery. He said that both consumer confidence and commercial confidence are still pretty fragile, though they have recovered a bit. "It is very uncertain how strong the recovery will be and there 's a lot of uncertainty about the pace of recovery," he added. So he warned that it would be dangerous to put the brakes on the stimulus before the economy as a whole is ready to grow stably.
"So don't expect there to be a rapid bounce back especially in the advanced economies considering their long-term drought in the banking sector," he said, "plus the fact that governments particularly in the U.S. and the UK and some other countries have very large budget deficits." Ultimately, those deficits will have to be paid back, which implies big tax raises in the countries with deficits and implies very tight control of spending probably over the next five years or more. Hawksworth said the tight fiscal policy, together with the banking problems and the fact that interest rates will go back to more normal levels, would add dead weight to the active recovery. "The recovery will probably be relatively slow especially in the advanced economies," he added. (For more biz stories, please visit Industries)
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