The boss of the IMF has redoubled his pre-Christmas warning that governments must not abandon their economic stimulus measures too soon.
Dominique Strauss-Khan said recovery in private demand and employment had to come before a tightening of liquidity, or else the developed countries could suffer a “double dip” recession.
Recovery in the developed world remained sluggish he said, citing 1990s Japan as an example of how government reined back support before companies and banks had cleaned up their balance sheets, plunging the country into deeper recession.
A second recession could prove fatal as the aggressive stimulus measures currently being applied might not be available the second time around, and there are few other tools available.
Strauss-Khan noted the strength of the global economy is stronger than expected, and that Asian economies were leading the way. The IMF expects China’s 2010 growth to be back to levels close to those before the crisis.