IMF chief economist:"The worst is yet to come"

2008-11-24 04:44:13 - "The worst is yet to come," Blanchard said in a Newspaper interview on Saturday, adding that "a lot of time is needed before the situation becomes normal."

IMF's chief economist has warned that the global financial crisis is set to worsen and that the situation will not improve until 2010. Olivier Blanchard also warned that the institution does not have the funds to solve every economic problem.

He said economic growth would not kick in until 2010 and it will take another year before the global financial situation

became normal again.

IMF on Friday promised to help Latvia deal with its economic crisis after it assisted Iceland, Hungary, Ukraine, Serbia and Pakistan. Blanchard said the IMF was not able to solve all financial issues, in particular problems of liquidity.Withdrawals of capital leading to problems of liquidity "can be so significant that the IMF alone cannot counter them," he said, adding that massive withdrawals of investments from emerging countries could represent "hundreds of billions of dollars."We do not have this money. We never had it," he said.

He also urged central banks around the world to cut interest rates, after the Swiss National Bank made a surprise one percentage point rate cut Thursday.
The central banks "should lower interest rates to as close to zero as possible," he said.

"The Secretary-General Ban Ki-moon is convening a high-level retreat meeting, with leaders of G20 and non-G20 countries, to discuss the global financial
crisis," said Marie Okabe, his deputy spokesperson, meeting will
culminate to the way toward the ministerial level meeting on fiscal
and development on 29th November-2nd December in Doha with Ban on
hand, added Okabe.

Global economy is interwoven and the global meltdown will surely affect India's economy but the India's most sought planning wing of government of India has its own tale to tell.

Surprisingly,Planning Commission has said India will get away lightly with the global financial meltdown which has pushed the economies of the developed world into a recession.Commission pointed out that India is not immune from the happenings in the international arena and if there is a decline in the capital inflow, as a result of the foreign investors' need for liquidity, the stock markets will get affected.Domestic investors might also face difficulties in raising capital which may hurt the domestic growth. Similarly, exports will be hit on account of slowing down of international economy.On the other hand as per the Planning Commission, the growth rate of the Indian economy for 2008-09 will continue to be one of the highest in the world.It noted that the growth rate realised in the agriculture sector is also greater than the target set for the Eleventh Plan.

The Commission said, the growth rate realised in the industry and the services sector are high and match the expectations of a fast expanding economy.