IMF Says Global Slowdown Could Be ‘More Lasting’

In its World Economic Outlook report, the IMF said, “A key issue is whether the global economy is just hitting another bout of turbulence in what was always expected to be a slow and bumpy recovery or whether the current slowdown has a more lasting component.” It went on to say, “The answer depends on whether European and U.S. policymakers deal proactively with their major short-term economic challenges.”

World Bank President Jim Yong Kim, speaking at a forum in Seoul, said Tuesday that he saw some encouraging indications in Europe. But IMF Chief Economist Olivier Blanchard pointed out that the yields on Spanish and Italian bonds could move upward in the absence of bailouts for both countries. Yields had fallen after the European Central Bank (ECB) had announced a plan to buy unlimited amounts of the countries’ sovereign bonds.

“Confidence in the global financial system remains exceptionally fragile,” the IMF said in its report. “Bank lending has remained sluggish across advanced economies.” More risk aversion has also cut the flow of funds into emerging markets, it added.