NEW YORK, (Reuters) – China yesterday said its economy is on the road to recovery, even as the International Monetary Fund forecast the deepest contraction in the global economy since World War Two.
In its latest World Economic Outlook, the IMF cut its forecast for growth, saying the global economy would likely contract by 1.3 percent this year.
Separately, U.S. Treasury Secretary Timothy Geithner said the United States carries much of the blame for the economic crisis, but the world must work together to ease the strains.
“We bear a substantial share of the responsibility for what has happened,” Geithner told the Economic Club of Washington. He warned that the rest of the world will not be able to rely so heavily on exporting to U.S. consumer markets for the global economy to grow.
“We must set ourselves on a path so that one country, or group of countries, does not consume in excess while another set of countries produces in excess,” he said.
Results reported by Morgan Stanley underlined that the global economic crisis is far from over, as the U.S. bank posted its second straight quarterly loss. The results included huge losses on investments in commercial real estate, an area that Morgan’s chief financial officer, Colm Kelleher, called his “single biggest worry.”
But there was optimism in China as Deputy Central Bank Governor Yi Gang said the world’s third-largest economy was on track to grow close to Beijing’s 8 percent target this year after hitting a low point in the last three months of 2008.
“Looking into the future, the second quarter and the remainder of this year will continue this recovery trend,” Yi told a meeting in Beijing.
Goldman Sachs raised its forecast for China’s GDP growth this year to 8.3 percent from 6.0 percent, following upgrades last week from other international banks.
China, helped by a $585 billion state stimulus plan, is expected to be the first major economy to recover. But the picture is patchy even in Asia. Japan’s March exports nearly halved compared with a year earlier, but rose from February, the first monthly gain since last May.
There was also optimism in other countries, with a senior Canadian finance official in Ottawa saying the Group of Seven leading industrialized nations will signal at a meeting in Washington this weekend that there are glimmers of economic hope.
But in Britain, Finance Minister Alistair Darling said the British economy was in its worst shape since World War Two and predicted it will shrink 3.5 percent this year before recovering weakly in 2010.
Darling said top British earners — anyone earning in excess of 150,000 pounds ($218,655) — will face a new 50 percent tax rate and government borrowing would soar to a record 175 billion pounds ($255 billion) in 2009-10.
In continental Europe the outlook also remained grim. Leading German experts will predict the nation’s once-powerful economy will shrink 6 percent this year and won’t grow even in 2010, sources said.
