The World Bank’s chief economist urged countries Feb. 24 not to abandon their stimulus policies, citing the risk of a second dip in the global economy. Justin Yifu Lin said the global economy is showing signs of recovery but there remain a ‘lot of uncertainties.’… He said one of the main challenges the world faces now is excessive production capacity, which raises the risk of a double dip. Dow Jones adds that Lin said that most economies in East Asia can in general better “endure external shocks” given their sufficient foreign exchange reserves and that their government deficits are ‘relatively small and manageable” but said “it’s too early to exit stimulus measures.” He cited underutilized capacity as still very high, “meaning unemployment will be maintained at a high level and consumption will be slow and conservative.” Lin noted that each government needs to keep tabs on the quality of stimulus measures, saying that investments should be made in such sectors as green growth and infrastructure, which would inevitably drive up national debts in the short term but lead to long-term growth and eventually reduce national debts by generating greater tax revenue.
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