The Bankwatch

Tracking the consumer evolution of financial services

Global Economic Policies and Prospects | IMF note to G20

This is an excellent paper designed as a note the to G20 Finance Minister meeting which just occurred in Horsham last week.  It provides context and detailed analysis of the issues affecting the world economy, and with good detail on the risks and issues relative to banks.

Some notes from their conclusions:

  • while they conclude a return to GDP growth could occur in the 3rd quarter 2010, the conditions on that conclusion and the risks noted, make a return to growth by then unlikely.
  • Deflation remains a fact for some time
  • On banks and financial sector policies:

The restoration of financial sector stability and market trust is a necessary condition for reversing the downward momentum of the global economy, enhancing the effectiveness of macroeconomic policies, and paving the way for an enduring recovery.

Provide necessary public support for resolution of distressed assets and recapitalization. An approach that has a proven track record involves removing impaired assets from financial sector balance sheets, moving them into publicly owned asset management companies. Viable banks should then be quickly recapitalized, with public money if necessary. Insolvent institutions (with insufficient cash flows) should be closed, merged, or temporarily placed in public ownership until private sector solutions can be developed.


Here is the transcript of the conference call that introduced the report earlier today.Some highlights:-

  • While the forecast round is not yet complete, it is clear that the global economy is likely to contract for the first time since the Second World War in 2009. At this point, we expect global GDP to decline between half a percent and 1 percent in 2009 before recovery gradually gets underway in 2010.
  • The major advanced economies, the United States, the Euro Area and Japan, are all suffering severe recessions. The emerging and developing economies are slowing abruptly and many of these are also likely to see falls in activity in 2009.
  • This outlook represents a substantial further downward revision to our global projections since we released our January 2009 WEO Quarterly Update.
  • ….. but I should emphasize that the turnaround depends on strong policy implementation. First and foremost, there will be no enduring recovery until financial-sector stability is restored.
  • The 2010 forecast is subject to much greater uncertainty. The risks on 2010 are substantially larger than for 2009.
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Written by Colin Henderson

March 19, 2009 at 13:07

Posted in Uncategorized

2 Responses

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  1. So no one griped about Bernanke’s monetary policy, eh? (Not publicly anyway…)

    Jeffry Pilcher

    March 19, 2009 at 14:36

  2. @Jeffry – check out my latest post. I just read 83 pages of the Wall St vs Washington blame debate in NY this week. Simply fascinating and Ferguson is absolutely with you on that.


    March 19, 2009 at 23:33

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