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IMF`s Lipsky sees `clear signs` of a global rebound

The global economy is showing "clear" signs of a rebound and central banks are unl...

  Briefly noted Op-eds/Letters/Editorials Financial Markets   IMF`s Lipsky sees `clear signs` of a global rebound  The global economy is showing "clear" signs of a rebound and central banks are unlikely to raise borrowing costs for many months, the IMF's No. 2 official said, Bloomberg reported. "The signs are clear -- if still tentative -- of renewed growth," John Lipsky, the IMF's first deputy managing director, wrote today on its Web site. "With inflation threats distant, there is little doubt that central bankers intend to keep policy interest rates very low for some time to come."   Lipsky's commentary was posted after he attended a Federal Reserve Bank of Kansas City symposium in Jackson Hole, Wyoming, that ended two days ago. Policy makers at the conference, who included Fed Chairman Ben S. Bernanke and European Central Bank President Jean-Claude Trichet, "stand ready to act further, if needed" to ensure the recovery becomes a sustainable expansion, he said. "Without any doubt, the mood in Jackson Hole was more upbeat than it would have been even a few months ago," Lipsky said. "Policy makers and central bankers can see that global growth prospects are reviving, and they sense that their actions are bearing fruit." "The recovery will remain inhibited until financial markets return to more normal functionality," Lipsky said. "While there are positive signs -- such as the rapid improvement in some emerging market debt and equity markets -- any key securitization markets are still impaired." ---------------- The Asian Development Bank approved its first loan under a $3b program to support developing country members` fiscal stimulus efforts   The Asian Development Bank approved its first loan under a $3b program to support developing country members` fiscal stimulus efforts, agreeing to lend $500m (?349m, £304m) to the Philippines yesterday, FT reported. The bank said it had received applications for more than the $3b available, with Bangladesh, Indonesia, Kazakhstan, Pakistan, Sri Lanka and Vietnam also requesting help. Bangladesh, like the Philippines, has asked for the maximum $500m. The IMF is allocating special drawing rights worth $735m to Dhaka to strengthen its foreign exchange reserves amid the global downturn, a fund official told Reuters yesterday.   ---------------- Germany`s economy exited recession in the second quarter Germany`s economy exited recession in the second quarter, growing by 0.3%, as net trade and private consumption offset a sharp reduction in firms` inventories, Federal Statistics Office data showed today. The final data showing an expansion in GDP put an end to four straight quarters of contraction and raised hopes of better days to come. Having overcome its deepest slump since World War Two, analysts believe the German economy should rally as companies ramp up production and rebuild their depleted inventories.   ---------------- The Egyptian economy expanded 4.7% in the fiscal year through June, beating forecasts by economists and the IMF, Bloomberg reported. "The Egyptian economy is starting to overcome the financial crisis," government spokesman Magdy Rady told reporters today in Cairo. Economic Development Minister Osman Mohamed Osman and Finance Minister Youssef Boutros-Ghali had announced the data earlier to Bloomberg News. The growth rate indicates that the economy of the most populous Arab country expanded about 4.6% in the final quarter of the fiscal year compared with 4.3% in the previous three months, said Mohamed Abu Basha, an economist at Cairo-based investment bank EFG-Hermes.  ----------------   World recovery is not yet in the bag The FT comments today in an editorial: "Some good news: Germany, France and Japan recorded output growth in the second quarter of 2009. These rises in output are cheering: they represent work created and profits made. Equity markets have also started to rediscover a little of their swagger: the FTSE 100 and S&P 500 now sit at levels not seen since October of last year. But as a posse of central bankers - corralled this weekend at the Federal Reserve's annual retreat in Jackson Hole, Wyoming - were keen to point out, it is not safe to blithely assume that a recovery is now well under way: policy must remain stimulative for the foreseeable future.   "The second-quarter GDP results were good, but their significance should not be overstated. Falls in output during and after the autumn financial panic were bound to overshoot. These recent rises, therefore, may not indicate recovering demand, so much as output rising to find its real floor. This GDP rebound was also supported by a strong global cocktail of stimulus. Such policies take time to kick in, but some of the measures will have had an effect on second-quarter results. And as the effect of these doses peaks over the coming quarters, they will probably power further growth.   "So even if there is a consistent rise in output in the next few quarters, it will not necessarily mean that the recession is over, or that support for the economy should be withdrawn. Indeed, it seems much more likely that stimulus measures will need to be extended than that they will need reining in ahead of schedule. First, there are problems weighing on demand everywhere. (...) Second, little progress has been made in rebalancing the world economy. The nations whose consumption powered the boom, notably the U.S. and the U.K., are suffering balance-sheet recessions. Overindebted, their consumers are likely to want to spend some time saving. So, if it is to be sustainable, the recovery will need to rely on demand from countries that have not recently been big spenders: notably frugal Germany and Japan. But there is still little sign of that kind of shift. All is uncertain, and one must hope that the recovery is rapid. But it would be foolish to assume it."   The financial crisis one year later   Jeffrey D Sachs commented in the Economic Times of India:" It is now almost a year since the world economy teetered on the edge of calamity. In the span of three days, September 15-17, 2008, Lehman Brothers filed for bankruptcy, the mega-insurance company AIG was taken over by the U.S. government, and the failing Wall Street icon Merrill Lynch was absorbed by Bank of America in a deal brokered and financed by the U.S. government. Panic ensued and credit stopped circulating. Non-financial companies could not get working capital, much less funding for long-term investments. A depression seemed possible.   "Today, the storm has broken. (...) Stimulus packages are controversial, because they increase budget deficits, and thus imply the need to cut spending or raise taxes sometime in the near future. The question is whether they successfully boost output and jobs in the short term, and, if so, whether they do enough to compensate for the inevitable budget problems down the road. The true effectiveness of these packages is not clear. (...) Policies in the U.S. and other rich countries should stimulate those investments through special incentives. The rich world should also provide the poorest countries with grants and low-interest loans to buy sustainable energy technologies, such as solar and geothermal power. Doing so would add to the global recovery, improve long-term environmental sustainability, and accelerate economic development. The crisis can yet be an opportunity to turn from a path of financial bubbles and excessive consumption to a path of sustainable development. In fact, seizing this opportunity is the only recipe for genuine growth that we have left."