World economy ‘making unbalanced recovery’

The recovery of world economy is proceeding — but it is an unbalanced recovery, sluggish in advanced countries but stronger in emerging and developing countries, the New York Times quoted IMF chief economist Oliver Blanchard as saying in a report today. Prime Minister of China Wen Jiabao criticised European Union who have called for stronger renminbi.

If the Chinese currency is not stable it will bring disaster to China and the world, he warned. More than 210 million people worldwide will remain without any employment an increase of over 30 million since 2007. Economies of the most advanced countries will grow 2.7 per cent this year and 2.2 per cent next year.

The growth rate in Asia will be 9.4 per cent this year and 8.4 per cent next year. China will record a growth rate of 10.5 per cent this year and 9.6 per cent next year. The United States on the other hand will see a growth rate of 2.6 per cent this year and 2.3 per cent next year. The euro areas economy will grow 1.7 per cent this year and 1.5 per cent next year.

The Institute of International Finance which represents more than 420 of world’s leading banks has urged leading economies to agree to a new currency pact to rebalance the global economy. Brazil has warned of the dangers of a currency war as countries unilaterally intervened to prevent appreciations of their currencies.

Robert Zoellick, World Bank President ruled out the possibility of a currency war but there is going to be tensions over the issue.

France and China are in close touch in their bid to heighten coordination of exchange rates to promote stability of the international monetary system. Though China has allowed renminbi to appreciate moderately the US House of Representatives passed a bill to impose duties on Chinese imports because of currency undervaluation. But the US is still to call China a currency manipulator.

Dominique Strauss-Kahn, the IMF chief has warned that the governments are risking a currency war if they try to use exchange rates to solve domestic problems. His views are different those aired by the WB president.