IMF predicted the world economy would expand 2.5% in 2010

The IMF plans to adjust its global growth forecast to "just below" 3% for 2010, a senior economist at the lender said, higher than its prediction in July, Bloomberg reported. The projections haven't been finalized, Jorg Decressin, a division chief in the IMF research department, said on a panel at the Carnegie Endowment for International Peace in Washington yesterday. In July the IMF predicted the world economy would expand 2.5% in 2010 after contracting 1.4% this year. The new forecasts will be released Oct. 1.

"The main risk is that people mistake the recovery we are seeing right now for a self-sustained recovery and withdraw the policy support prematurely," Decressin said, adding that he still sees risks "on the downside." The IMF currently expects the global economy to expand at slightly less than 3% in 2010, said Jorg Decressin, a senior IMF economist, WSJ reported. "The recovery is for real but it is very heavily policy dependent," Mr. Decressin said at a session at the Carnegie Endowment for International Peace. At some point, he said, private demand would have to replace the boost to the global economy from government monetary and fiscal expansion.

The global manufacturing rebound gathered pace in August, a string of closely watched surveys showed yesterday, raising hopes of a sustainable recovery in the world economy, FT reported. The U.S., China, Germany and France reported further strong improvements, adding to evidence of a v-shaped recovery in economic growth in the third quarter. However, some European countries, including U.K., were left behind.

American manufacturing expanded for the first time in 19 months, and pending sales of existing homes rose more than forecast, indicating the worst recession since the 1930s has ended, Bloomberg reported. The Institute of Supply Management's factory index posted its biggest two-month gain since 1983, rising to 52.9 in August; readings higher than 50 signal an expansion. The National Association of Realtors said signed purchase agreements for existing properties jumped 3.2% in July, for a record sixth consecutive gain.

World Bank President Robert Zoellick said the chances of a "truly global recovery" have increased because of China's expansion and improvements in other economies, Bloomberg reported. China's economy is likely to grow by close to 8% this year, topping the institution's most recent estimate, Zoellick said at briefing in Beijing today. Premier Wen Jiabao pledged yesterday at a meeting with the World Bank head to maintain stimulus spending and a "moderately loose" monetary policy, saying the world's third-biggest economy is at a "critical stage."

EU finance ministers were set to agree today that the EU should not be too hasty in withdrawing fiscal stimuli and other extraordinary measures introduced in response to the worst economic crisis in Europe's post-1945 history, the FT reported. "The time has not yet come to withdraw from the fiscal stimulus," said Jean-Claude Juncker, chairman of the 16-member group of euro zone finance ministers. "We have to continue this effort in the course of this year and next year. Then we have to agree on an exit strategy." The EU ministers were arriving in Brussels for an informal lunch meeting aimed at preparing the ground for a two-day session of G-20 finance ministers on Friday and September in London.

The removal of fiscal and monetary policy stimulus provided by governments and central banks around the world to limit the scale and depth of the recession must be coordinated, European Commissioner for Economic and Monetary Affairs Joaquin Almunia said today, DJ reported from Brussels. Almunia was speaking to reporters ahead of a meeting of the Euro Group of finance ministers form the 16 countries that use the euro, and later finance ministers from all 27 European Union members.

Eating less frequently and consuming worse food as a result of the global financial crisis

People living in the world's poorest communities are eating less frequently and consuming worse food as a result of the global financial crisis, according to a study of the impact of the recession in five developing nations published today. Many poor families hit by the economic downturn are also removing their children from school, research by the Institute of Development Studies showed, and in a number of countries children are being pushed into work early as a consequence of the international crisis. Research conducted in Bangladesh, Indonesia, Kenya, Jamaica and Zambia attempted to provide a rapid overview of the consequences of the recession in some of the world's most deprived communities.

The Treasury Department will report the actual deficit later this month

The U.S. government spent a record $1.4 trillion more than it collected in the fiscal year ended Sept. 30, congressional analysts said on Wednesday, in their final estimate before the official numbers are issued.
Bank bailouts, stimulus spending and declining tax revenues due to a deep recession led the government to post a deficit that amounts to 9.9 percent of the U.S. Gross Domestic Product for the 2009 fiscal year, the Congressional Budget Office said.
The Treasury Department will report the actual deficit later this month. The deficit for fiscal 2008 was $459 billion.
The $1.4 trillion estimate is less than the budget office’s estimate of $1.58 trillion issued in August, but the discrepancy arises from differences in calculating the costs of bailing out mortgage giants Fannie Mae and Freddie Mac, not any sudden change in economic conditions, CBO said.
The government took in $2.1 trillion in fiscal 2009, a 16.6 percent drop from the previous year as the recession led to sharp declines in individual and corporate income taxes, CBO said.
On the other half of the ledger, outlays increased 17.8 percent to $3.5 trillion, CBO said.
Among the most expensive items were $154 billion for bailouts under the Troubled Asset Relief Program, $91 billion for the Fannie and Freddie bailouts, and $100 billion under the massive stimulus package approved in February.
Excluding items in the stimulus package, spending for unemployment benefits more than doubled to $120 billion, CBO said.
One bright spot: the government’s interest payments on its debt actually decreased 23 percent to $199 billion thanks to lower interest rates, CBO said.

Developing countries clouded talks between global finance chiefs

Fierce disagreement over how much power rich nations should cede to developing countries clouded talks between global finance chiefs on expanding the role of the International Monetary Fund.
The IMF, which has lent more than $50 billion to countries around the world this year, says it needs more resources to oversee the recovery of the global economy and prevent future crises.But this depends on giving emerging market economies a greater stake in the institution. Major developing nations are demanding an increase in voting power that would see the developed world shift at least 7 percentage points of its share to emerging countries.

"We can only hope that over-represented advanced countries will realise that they may do great harm to the Fund if they attempt to block or delay quota and voice reform," Brazilian Finance Minister Guido Mantega said on Sunday.
He said the Fund needed to change the structure of its board so it could "cease to be regarded as mainly an American-European institution and become a truly multilateral institution".
The Group of 20 major nations agreed at a summit of their leaders in Pittsburgh last month to a power shift of at least 5 percentage points to under-represented countries such as China.
But the demand for 7 percentage points is meeting resistance from the developed world, particularly European nations, which do not want to give up too much of their own power.
Finance Minister Anders Borg of Sweden, which is currently president of the European Union, warned that Europe could become less generous in its financial support of the Fund if it lost influence over it.
"Adequate participation in the decision-making process of the fund is a prerequisite for our taxpayers’ continued support of large financial contributions," he said.
Just a year ago the IMF was fighting to persuade governments of its importance. But the crisis has greatly increased demand for its loans and advice to countries struggling with budget and current account deficits.
Allowing big developing countries to play a bigger role in the IMF could secure billions of dollars of fresh contributions to the organisation.
To ensure the global economy is stable enough for countries to stop accumulating huge foreign exchange reserves as a form of insurance, it is estimated that the IMF might need up to $1 trillion of fresh contributions, IMF Managing Director Dominique Strauss-Kahn said on Friday.
But China, Brazil, Russia and India have said any increase in their contributions must be tied to changes in voting power.
China believes contributions should automatically adjust to reflect the size of individual countries’ economies, Yi Gang, a Chinese central bank vice governor, said on Sunday.
In addition to the IMF’s role as a lender of last resort, the Group of 20 major nations, which is managing the global recovery, wants the IMF to ensure balanced growth by reporting back to it on countries’ policies and recommending changes.
China, which holds the world’s largest foreign exchange reserves and has seen its financial markets buffeted by volatile capital movements, wants the activities of a reformed IMF to extend even further.
Yi said the IMF should strengthen its supervision over international capital flows and promote the relative stability of major reserve currencies.

The Vietnam's business confidence index

The Vietnam's business confidence index (BCI) in the second quarter this year increased by 31 points over the first quarter to 130 points, the online newspaper vnexpress reported Tuesday.

The figure was released in a recent survey, conducted by the Vietnam World Vest Base Financial Intelligence Services (WVB FISL) and the PetroVietnam Finance Consultancy and Investment Company ( PVFC Invest).

There were 192 companies in 11 key industries of Vietnam including transport, banking and finance and oil sectors, getting involved in the survey.

Up to 53 percent of companies surveyed held that the country's overall economic health had improved compared to 12 months ago. Meanwhile, as many as 59 percent said that they had the plan to recruit new employees in the next 12 months.

In the survey, most Chief Executive Officers (CEOs) expressed confidence in increasing companies' revenues and profits for the next 12 months. Up to 81 percent gave higher sales projections while 72 percent expected their profits would increase.

When asked about the government's stimulus package, all respondents said that they believed such key measures, including interest rate reduction of consumer and corporate loans, would boost economic growth.