IMF head in ‘double-dip’ global economy warning

The International Monetary Fund head has warned that the global economy could experience another downturn – a so-called double dip recession.

Dominique Strauss-Kahn said countries should not exit from stimulus packages that have bolstered growth through huge amounts of government spending.

“We have to very cautious because this recovery remains very fragile,” Mr Strauss-Kahn said.

Separately, Germany and France raised their growth forecasts for the year.

Mr Strauss-Kahn added that China and Asian economies are leading the recovery.

“Recovery in advanced economies has been sluggish,” he said. “The best indicator is private demand and employment.”

“In most countries, growth is still supported by government policies. For as long as you do not have private demand strong enough to offset the need of public policy, you shouldn’t exit.”

He added that tackling high levels of government debt will be a priority for many governments.

He suggested that the IMF would raise its growth forecasts for this year.

The IMF is currently predicting the global economy will grow by 3.1% in 2010.

Growth upgrades

Europe’s two largest economies, Germany and France, also raised their economic growth forecasts for the year.

Germany now expects its economy to expand by 1.5% in 2010, from its previous prediction of 1.2%.

“We are pleased that the economic development is now somewhat better” than it originally predicted, the finance ministry said.

The French government almost doubled its growth forecast to 1.4%, from 0.75%.

“Our forecasts at the start of 2010 have also improved, as the international climate and demand addressed to France have picked up,” finance minister Christine Lagarde said.

The IMF also raised its French forecast for the current year, to between 1% and 2%, rather than 0.9%. –BBC News