The global economy is beginning to recover from the worst recession since the Great Depression, but sustaining it will require engineering greater US exports and larger Asian domestic demand, IMF chief economist Olivier Blanchard said Aug. 18. "The recovery has started," Blanchard said in a paper entitled Sustaining a Global Recovery. But he also said that the current recession has left "deep scars, which will affect both supply and demand for many years to come." Blanchard cautioned that predictable models based on past recoveries from recessions would not apply to the worst global slump since World War II. "The world is not in a run-of-the mill recession. The turnaround will not be simple."
Amid signs the rest of the world may be recovering from the global financial crisis, Africa is still being hammered. South Africa's economy, the continent's largest, shrunk by another 3 percent in the second quarter, an omen that things may get even worse before they improve. Africa had at first been seen as isolated from the market and banking turmoil that engulfed Europe and the United States, but a drop in Western consumer demand means Africans are selling fewer of the commodities on which many of their economies depend. In South Africa, manufacturing production dropped by 17 percent in June, and gold output in June was 12 percent lower this year than for the same period the previous year.
The IMF will soon inject USD 250 billion into member nations' coffers to cushion the blows of the global economic crisis. Employing a rarely used tool, the IMF said its board of governors approved the allocation to its 186 members "to provide liquidity to the global economic system by supplementing fund's member countries' foreign exchange reserves." The IMF plans to distribute its quasi-currency Aug. 28, with each country's allotment based on its quota at the fund. The SDR issuance will amount to about 74 percent of each country's quota. Countries with the largest quotas are also getting the most SDRs. The US, which has the highest quota at 16.8 percent, will get 30.4 million SDRs from the two allocations, or nearly USD 50 billion. Japan and Germany would follow, each getting over USD16 billion.