Istanbul - The International Monetary Fund (IMF) and World Bank warned Friday of major pitfalls as the world economy begins to recover from its worst recession in seven decades. One day after the IMF declared the global recession had ended, Managing Director Dominique Strauss-Kahn said rising unemployment would cast "a long shadow" over the recovery in 2010 and beyond.
Strauss-Kahn, in a press conference ahead of the IMF and World Bank's annual meetings in Istanbul this weekend, said the crisis would not be considered over until jobs were being added in the world's major economies.
"I'm still very much concerned about rising unemployment," Strauss-Kahn said. Job losses would likely continue for many more months and cast "a long shadow over the recovery."
The IMF, in its semi-annual World Economic Outlook released Thursday, said the world had pulled out of recession. But it projected unemployment will reach 10.1 per cent in the United States in 2010 and climb to nearly 12 per cent in the euro area by 2011.
The world also faces an uncertain recovery because massive government spending measures, enacted at the height of the crisis last year, will begin to run out in 2010. Strauss-Kahn said governments should be careful not to pull their support too early.
World Bank President Robert Zoellick warned that his institution was running out of resources and that more would be needed to help developing nations boost domestic demand in coming years.
"We have broken the fall of the financial crisis, but it is certainly too early to declare success," he said.
Many emerging countries, which are already leading the recovery, were poised to become major drivers of world growth. But Zoellick said they would need more loans from the World Bank in coming years to complete the process.
"A multipolar economy, less reliant on the US consumer, will be a more stable global economy," Zoellick told reporters, echoing a call for more "balanced" growth by leaders of the Group of 20 last week.
Zoellick said the World Bank's resources could run out by the end of 2011. The development institution has nearly tripled its lending to 33 billion dollars in the past year as the world plunged into a deep recession.
"Our shareholders are going to have to calculate how close they want to run us to the edge," Zoellick said, as the world's finance ministers were set to gather this weekend in Istanbul to consider the request.
By contrast, the IMF, which deals more with emerging and wealthy countries, has seen its lending resources tripled to 750 billion dollars by leaders of the Group of 20 nations. The G20 has also given the IMF a role in watching over its economic policies.
"This annual meeting may be the starting point of a new IMF," Strauss-Kahn said.
