YALTA (UKRAINE): The world's economy is teetering between "the ice of recession and the fire of inflation", but may see some recovery by early next year, IMF Managing Director Dominique Strauss-Kahn said on Friday.
Addressing a conference in the Ukrainian Black Sea resort of Yalta, Strauss-Kahn characterised the economic situation as the "first crisis of the 21st century" made up of soaring inflation and a financial market crisis. But the crisis was receding.
"No one can say that the world economy is at a good temperature," he said.
"We are just between the ice of recession and the fire of inflation," he said, adding that soaring energy and food costs had topped the agenda of a meeting of leaders of G8 industrialised countries in Japan.
Strauss-Kahn said U.S. growth in the first quarter was better than expected at 0.9 percent, but anticipated a global economic recovery only in the first or second quarter of 2009.
The world economic order, he said, was rendered more unpredictable by the fact that the financial crisis originated in the United States amid doubts over low standard mortgages.
"It was the strongest economy and it was on the top of the pyramid of power," he said. "What happened now is that the pyramid is a bit upside down. It is no longer a pyramid of risk."
Although the worst of the financial market crisis was over, more challenges lay ahead.
"The answer has been global and broadly adequate. The central banks collaborated well together and they finally solved the question that avoided a crisis," he said.
"The biggest part is behind us ... The economic consequences of the crisis are obviously in front of us."
EMERGING MARKETS
Strauss-Kahn said emerging market countries were "really emerging" on the basis of high growth rates in both celebrity economies like India and China and "B-list" regions such as West Africa.
But markets should not subscribe to "decoupling" theories that suggest emerging economies are unaffected by the West's performance. The impact, he said, was merely delayed.
And inflation remained a global problem -- deeply felt among poor emerging countries -- requiring a global solution.
"The good news is after decades of stop-and-go cycles emerging economies are really emerging," he said. "But in developing countries, inflation is a huge problem. It's a case of life and death."
Price rises in Ukraine, for example, were "unsustainable" at about an annual 30 percent over the past three months.
But most developing countries were importing inflation -- the soaring price of oil, and in Ukraine's case gas imports, and rocketing food prices after droughts.
"They have almost no tools to deal with this," he said.
Strauss-Kahn said it was difficult to forecast when inflation might start coming down as there was no clear idea when oil prices might fall or when food supply and demand balances might correct themselves.
He said current oil prices of about $130-140 per barrel knocked one percentage point off global economic growth.
Addressing a conference in the Ukrainian Black Sea resort of Yalta, Strauss-Kahn characterised the economic situation as the "first crisis of the 21st century" made up of soaring inflation and a financial market crisis. But the crisis was receding.
"No one can say that the world economy is at a good temperature," he said.
"We are just between the ice of recession and the fire of inflation," he said, adding that soaring energy and food costs had topped the agenda of a meeting of leaders of G8 industrialised countries in Japan.
Strauss-Kahn said U.S. growth in the first quarter was better than expected at 0.9 percent, but anticipated a global economic recovery only in the first or second quarter of 2009.
The world economic order, he said, was rendered more unpredictable by the fact that the financial crisis originated in the United States amid doubts over low standard mortgages.
"It was the strongest economy and it was on the top of the pyramid of power," he said. "What happened now is that the pyramid is a bit upside down. It is no longer a pyramid of risk."
Although the worst of the financial market crisis was over, more challenges lay ahead.
"The answer has been global and broadly adequate. The central banks collaborated well together and they finally solved the question that avoided a crisis," he said.
"The biggest part is behind us ... The economic consequences of the crisis are obviously in front of us."
EMERGING MARKETS
Strauss-Kahn said emerging market countries were "really emerging" on the basis of high growth rates in both celebrity economies like India and China and "B-list" regions such as West Africa.
But markets should not subscribe to "decoupling" theories that suggest emerging economies are unaffected by the West's performance. The impact, he said, was merely delayed.
And inflation remained a global problem -- deeply felt among poor emerging countries -- requiring a global solution.
"The good news is after decades of stop-and-go cycles emerging economies are really emerging," he said. "But in developing countries, inflation is a huge problem. It's a case of life and death."
Price rises in Ukraine, for example, were "unsustainable" at about an annual 30 percent over the past three months.
But most developing countries were importing inflation -- the soaring price of oil, and in Ukraine's case gas imports, and rocketing food prices after droughts.
"They have almost no tools to deal with this," he said.
Strauss-Kahn said it was difficult to forecast when inflation might start coming down as there was no clear idea when oil prices might fall or when food supply and demand balances might correct themselves.
He said current oil prices of about $130-140 per barrel knocked one percentage point off global economic growth.
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