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IMF chief warns of 'lost decade' of global growth

by David Campbell on Oct 04, 2012 at 07:54

IMF chief warns of 'lost decade' of global growth

The world is less than half way through a lost decade of volatility and below trend global growth the International Monetary Fund’s chief economist Olivier Blanchard has said.

‘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 into decent shape, Blanchard told website Portfolio.hu.

While the eye of the storm remains Europe, he warned that the crisis had revealed global structural weaknesses that would impact on growth prospects for the foreseeable future.

‘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 said debt restructuring would also be the dominant force impacting on the US economy but that this had to be achieved at a slow enough pace to sustain growth, walking a ‘narrow middle path’ between excess debt and austerity.

‘If you do it too slow, the market thinks you are not serious, if you do it too fast, you kill the economy. For each country you have to find the right path of consolidation.’   

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