Global economy at turning point

13th May 2009, Comments 0 comments

Group of 10 central bankers say the economic downturn is slowing and in some cases recovering.

BASEL - The global economy, hit by the worst slump in decades, is now at a turning point, with recovery apparent in some cases and the downturn slowing in others, top central bankers said on Monday.

"We are, as far as growth is concerned, around the inflection point in the (economic) cycle," European Central Bank head Jean-Claude Trichet said, speaking as the spokesman of the Group of 10 central banks.

"In all cases, we see a slowing down of the decrease of GDP (Gross Domestic Product) that has been observed in the last quarter of last year and the first quarter of this year," he said after a regular G10 meeting.

"In certain cases you see already a picking up, in other cases you see it continuing to fall but at a lower pace."

In particular, Trichet said "a number of emerging economies seem to be beyond the inflection point."

Separately, ECB governing council member Miguel Angel Fernandez Ordonez said that the worst may be over for the 16-nation eurozone.

"There are signs that the worst (of the economic slump) was in the first quarter," he told reporters on the sidelines of the central bankers meeting.

At their March meeting, the G10 central bankers felt the global economy was "approaching"  improvement.

The G10 groups 11 countries -- but still retains its original name -- Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom and the United States, who consult and cooperate on economic, monetary and financial matters.

Trichet also warned on Monday that the world had to remain watchful as the process was "ongoing."

"We have to remain alert, we are in uncharted waters, even if we are at the inflection point and even beyond in certain economies," he said.

Trichet pointed to some "encouraging" news in the banking sector but said that it was "no time for complacency."

Meanwhile, as the economy reaches the turning point, central banks and governments should now pay attention to "exit strategies" that would allow them to return to a "sound and sustainable situation," Trichet said.

Central banks and governments took unprecedented action in efforts to lift the global economy out of the worst crisis since the Great Depression of the 1930s.

Interest rates, including in the United States, Japan, Britain and the eurozone, are at all-time lows as central banks lower rates to stimulate lending and growth.

Governments also took on massive levels of debt in an effort to keep their economies on track, increasing pressure on public finances.

Trichet consistently warned of the need for governments to keep public spending under control, even during the crisis, and called on them to return to more normal practices as the economy recovers.

Trichet's latest impression of the global economy was consistent with the OECD grouping of leading economies, which said Monday that the downturn in some recession-hit countries was easing.

"Composite leading indicators continue to indicate a strong slowdown in the OECD area but the pace of the deterioration is easing," the Organisation for Economic Cooperation and Development (OECD) said.

AFP / Expatica

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