The global economy is beginning to recover from the recession, but government policies must still act to help the economy, the International Monetary Fund has said.
The IMF has updated its World Economic Outlook, in which it now sees the global economy will contract by 1.4% in 2009, up from a 1.3% decline it predicted in April.
But in good news, it now predicts the global economy will grow by 2.5% in 2010, compared to its April prediction of just 1.9% growth.
IMF chief economist Olivier Blanchard said at a press conference that the global forces dragging down the economy are beginning to show signs of easing away.
“This leads us to predict that while the world economy is still in recession, the recovery is coming, but it is likely to be a weak recovery,” he said.
The Australian share market has opened lower today, following negative leads on Wall Street where stocks were flat despite the new IMF report.
The benchmark S&P/ASX200 index was down 4.6 points or 0.12% to 3763.3 at 12.00 AEST. The Australian dollar also opened lower, down to US77c.
NAB jumped 0.1% to $22.11, while ANZ rose 0.5% to $16.38. Commonwealth Bank lost 0.5% to $37.06 as AMP fell 0.2% to $4.61.
Inflation expectations rise
A new survey shows that consumer expectations of inflation have risen for a second consecutive month due to the Government’s stimulus payments and higher petrol prices.
The Melbourne Institute survey of consumer inflationary expectations shows the expected median rate of annual inflation was 3.2% in July, up from 2.8% in June.
“The higher inflationary expectations observed in the last two months appear to be associated with the Federal Government’s stimulus package and upward pressure on automotive fuel prices,” Melbourne Institute research fellow Sam Tsiaplias said in a statement.
“In historic terms, however, consumer inflationary expectations are well below the 5.9 per cent observed this time last year, and slightly below the 3.5 per cent observed in July 2007.”
Overseas, Chinese authorities have detained Rio Tinto’s lead iron ore negotiator on suspicion of stealing state secrets. Stern Hu, along with three other Rio Tinto employees, has been detained.
But Foreign Minister Stephen Smith has said in Perth that he sees “no basis” in any speculation that the move is related to the Chinalco deal.
“Because we’re perplexed by the reason for his detention … we’re asking for additional information to the basis of his detention,” he also told ABC TV.
Overseas, The Dow Jones Industrial Average gained 14.81 points or 0.18% to 8178.41.
Alcoa recorded its third consecutive quarterly loss, with its second-quarter net loss at US$454 million, compared to earnings of US$546 million. But Brian Hicks, co-manager of US Global Investor’s natural resources fund told Reuters the result was better than some had thought.
“They were able to do better than expected from cost savings,” he said. “Year-over-year production is down and down sequentially as well, but it looks like they were able to contain costs.”
Meanwhile, the world leaders attending the G8 summit in Italy have said that no global recovery is guaranteed and will paying off debt incurred by stimulating the economy will have to wait until after world economies begin to heal.
“While there are signs of stabilisation, including recovery in stock markets, a decline in interest rate spreads, improved business and consumer confidence, the situation remains uncertain and significant risks remain to economic and financial stability,” they said in a statement.
“We agreed on the need to prepare appropriate strategies for unwinding extraordinary policy measures to respond to the crisis once the recovery is assured,” the statement said.
“The exit strategies will vary depending on economic conditions and public finances, and must ensure a sustainable recovery over the long-term.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
