International Monetary Fund (IMF) 10 released “World Economic Outlook” report that the world economic recovery is still fragile, and in 2010 the world economy will grow 4.8% in 2011, growth dropped to 4.2%. IMF also believes that the Asian countries including China should allow its currency to support a stronger and more flexible to stimulate domestic demand.

The main downside growth risks are somewhat

IMF is expected this year and global economic activity will expand by 4.8% and 4.2%, consistent with previous expectations, the downside risk is still grim.

The report noted that emerging and developing economies of output in 2010 and 2011 will grow by 7.1% and 6.4%, but the advanced economies this year and expected growth rate of only 2.7% and 2.2%. In the second half of 2010 and the first half of 2011, the growth of some economies will be slowing down, then economic activity will accelerate again. Economy will remain very weak, the unemployment rate will continue to remain high. Due to excess capacity, high unemployment, inflation will remain at low levels, but some emerging economies exception.

IMF said the risk of major biased growth forecasts downward. However, a sharp global economic downturn, including the advanced economies the possibility of stagnation or contraction appears to remain low.

Data show that the first half of 2010, economic recovery continued to strengthen. Annual growth rate of global economic activity is about 5.25%, compared with July figures are expected around 0.5%, inventory and the recent surge in fixed investment has brought manufacturing and global trade has increased dramatically.

“Most advanced economies and some emerging economies still face significant adjustments, including the need for increased household balance sheet, stable and reduce the high level of public debt and repairing and reforming its financial sector.” IMF report said.

In monetary policy, the report said most of the advanced economies to maintain monetary policy should be high degree of support to growth, with the financial support of the weakened economic activity monetary policy should be any less than the expected time to become the first line of defense. Major advanced economies as a policy interest rate is close to zero, if the private demand weakened with the emergence of financial support beyond the expected reduction, monetary policy makers may need to take further extraordinary measures.

In fiscal policy, IMF pointed out that in the short term fiscal consolidation is often inhibited economic growth. “By using the new data set, we found that cutting the equivalent of 1% of GDP budget deficit in two years tend to make the output fell 0.5%, and a third of a percentage point rise in unemployment.” Report cites cut interest rates and currency depreciation usually ease the financial impact of consolidation on economic growth. However, if interest rates are already near zero, or consolidation in many countries simultaneously, then this buffer will diminish.

China is expected to grow 10.5% this year

IMF also expects domestic demand in view of the situation, the Chinese economy this year and will increase by 10.5% and 9.6%, while the recent moderation of economic growth in the state will continue to be extended to 2011. 2010 to 2011, the recent growth of private domestic demand, the average contribution of about two-thirds share of the government accounted for one third of the pull.

The report also believes that the Asian region this year and will increase economic activity were 7.9% and 6.7%.

IMF pointed out that the region depends mainly on medium-term economic growth prospects between the domestic and external demand “re-balance.” China’s economic restructuring and re-balance issues, in a sense, appreciation of the renminbi will help China’s economic restructuring, large trade surplus is expected other countries in the region will allow their currencies to appreciate, and promote from dependence on exports to expand domestic demand and family consumption.

The report also pointed out that the whole of Asia including China region need to adopt certain policies to support sustainable growth in domestic demand, including the right to allow their currencies to rise in order to improve incomes and purchasing power, elimination of domestic investment or consumption of structural bottlenecks facing and increase the productivity of non-trade or services and so on.

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