At a meeting of officials from finance ministries in the Americas, International Monetary Fund Managing Director Dominique Strauss-Kahn said reducing fiscal vulnerabilities of advanced economies was crucial. “As recent events in Europe have reminded us, the dark clouds have not yet passed,” he said, referring to fiscal woes in Greece and Spain that have rattled financial markets.
In his prepared remarks, the IMF chief also encouraged hard-charging emerging markets to begin withdrawing fiscal and monetary stimulus they injected into their economies during the height of the global crisis. “In emerging markets, including in Latin America and the Caribbean, the concerns are a bit different. With the recovery more advanced, a natural starting point would be to remove temporary fiscal stimulus,” he said. “Fiscal correction can take some heat off monetary tightening, which in turn can dampen excessive capital inflows.”
Surging emerging economies will push global growth to a faster rate this year than previously thought, but the upward momentum will run out next year, a Reuters poll of economists showed on Friday. Median forecasts from 32 economists showed the global economy on a purchasing power parity basis growing 4.1 per cent this year.
