World economy still on shaky ground, experts say

World economy still on shaky ground, experts say

The rebound of the world economy may not be sustainable if large economic and income imbalances are not corrected soon, a senior official of the International Monetary Fund said in a speech on Tuesday in Singapore.

The warning comes in the wake of chaotic conditions in Tunisia and Egypt which have been partly spurred by woeful economic reasons.

"While the recovery is underway, it is not the recovery we wanted. It is a recovery beset by tensions and strains -- which could even sow the seeds of the next crisis," said Dominique Strauss-Kahn.

While tensions in the Middle East seem to be the focus now, his speech also referred to economic conditions elsewhere, such as the high unemployment rate in the United States. He specified the increasing income inequality in many countries, including the United States, as a major ingredient for political instability.

"Energy prices are rising swiftly, reflecting rapid growth in the emerging economies. Food prices are rising too...with potentially devastating consequences for low-income countries," Strauss-Kahn said. "Together, these price increases are beginning to feed into headline inflation."

The International Monetary Fund is estimating a 6.5 percent expansion of developing economies this year versus a much slower 2.5 percent growth rate for developed countries afflicted by joblessness and high debt. Those numbers represent the imbalance of growth being experienced by global economies.

The world economy should ideally recover more evenly by trimming budget deficits, revamping financial systems, and giving more emphasis to education, the IMF official said.

Posted by James Fried on Wednesday February 02 2011, 4:56 AM EST. Ref: CNN. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0