Global economy to remain fragile until 2018, according to IMF

Published October 4th, 2012 - 11:36 GMT
Global economy to remain fragile for years to come, says IMF
Global economy to remain fragile for years to come, says IMF

The global economy will not be back in 'decent shape' until at least 2018, the International Monetary Fund's chief economist has warned.

Olivier Blanchard said he feared the eurozone crisis, debt problems in Japan and the US, and a slowdown in China meant that the world economy would not be in good shape until at least 2018.

"It's not yet a lost decade," he said, adding: "But it will surely take at least a decade from the beginning of the crisis for the world economy to get back to decent shape".

According to the Guardian, Blanchard made his comments on a Hungarian website ahead of the IMF meeting next week in Tokyo.

Germany is expected to defend its handling of Europe's debt problems at the meeting, but Blanchard said there was more that Europe's largest economy could do to support Spain and other struggling euro zone nations, the report said.

In particular, he urged Berlin to accept a rise in inflation and wages that would make it less competitive with its trading partners.

"A somewhat higher inflation rate in Germany should simply be seen as a necessary and desirable, relative price adjustment," he said.

"Given overall demand conditions and the ECB's strong mandate to ensure price stability, this is not the beginning of hyperinflation," he added.

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