IMF warns on recession’s “social consequences”

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Dominique Strauss-Kahn, MD of the International Monetary Fund (IMF), has a surprisingly hard-hitting interview today in Bloomberg.

Casting aside normal central bank reticence he warns:

• Their current $1.4 trillion forecast of global financial losses will soon be increased by a “significant” amount.
• They will have to further reduce their November GDP forecast, which was already at a recession-level 2.2%.
• US tax cuts might have “very little impact on growth” unless targeted only at “the most vulnerable,” who are likely to spend the extra cash.
• W European governments are “behind the curve” in implementing stimulus packages and are “still underestimating the needs.”
• “Rates in Europe will probably go down in coming months. A decrease in interest rates is welcome but the impact will not be very important.”
• “If in six months from now the crisis has worsened and many other of our members need our help, the demand may be above what we have.”

As a former French Finance Minister, his final warning on the European outlook has psrticular resonance. He worries that “a rate of growth between -1% and -2% may have some really strong social consequences”.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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