IMF head says Asia will help prevent global double-dip

Economic growth in Asia and Latin America will help the rest of the world avoid a double dip recession, according to the head of the International Monetary Fund.

Dominique Strauss-Kahn, the managing director of the IMF, reiterated his belief that the global economy would not slip back into recession yesterday: "We expect 2011 to be a little lower than the level of 2010," he said. "But all this is too far from any kind of double-dip".

This followed the IMF's decision to upgrade its global economic growth forecast last week from 4.2 per cent to 4.6 per cent. It forecast that growth in 2011 would be lower at 4.3 per cent.

The IMF chief told the Asia 21 conference in South Korea that the region had emerged from the downturn as a global economic powerhouse, adding that its "time has come".

The fund predicted last week that Asia was to grow at 7.75 per cent in 2010, comprehensively outstripping its upgraded global projection. It estimated that China will grow 10.5 per cent, but added the growth will slow in the second half of the year and into 2011.

Yoon Jeung-hyun, the South Korean finance minister, said yesterday that China - as well as the US - may experience a temporary economic slowdown as governments withdraw their stimulus measures.

Yet he added: "During the recent economic crisis, the Asian economy has spearheaded the global economic recovery with appropriate stimulus packages and sound macroeconomic conditions. This trend is expected to continue for a while."

Strauss-Kahn said the IMF was now working with Asia to "strengthen our tool to prevent crises and mitigate systemic shocks". The IMF believes it is crucial to put measures in place to manage the rebound in capital inflows, and the risk of overheating and credit and asset bubbles.

Strauss-Kahn also called for the region to become less dependent on exports, and instead create a "second engine of growth" through domestic investment and consumption.

He said that the export model was not totally broken, but it was now "not enough because of the slowdown in Western economies".

The IMF called on Asian economies to develop a "social safety net," for their citizens, as well as increase access to credit for households and small and medium sized enterprises. It also advised governments to invest heavily in infrastructure.

"The American system and the Europeans had a lot of bad claims and balance sheets so a new kind of regulation is certainly needed there. Is it needed too in Asia? I would answer yes. Because you were immune to this crisis doesn't mean it will be immune to any crisis ever."

- THE INDEPENDENT