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Global economic recovery faces fragility, needs more actions

06-22-2010 08:37 BJT Special Report: Chinese Visits Canada, Attend G20 Summit |

BEIJING, June 21 (Xinhua) -- As the world's major economies are heading to a G20 summit in Toronto, Canada, the world with a bleeding global financial sector and fragile recovery is longing for further substantial actions.

Despite signs of worldwide recovery witnessed during the past five-plus months, a sustained economic growth has been undermined by the expanding eurozone sovereign debt crisis, high level of jobless rates and turbulence in the financial markets.

Mindful of these hardships, many economists believe the world economy would not achieve steady growth, while Justin Yifu Lin, the World Bank's Chief economist and senior vice president, warned of a possible second dip.

To battle the global financial crisis, almost all nations affected have adopted an expansionary economic policy, injecting liquidity into the financial pool. However, that option is not a zero-side effect panacea.

According to data released by the World Economic Forum, the budget deficit of the G20 nations averages almost 8 percent of their GDP, massively constraining their ability to either get more loans or pay off debts.

Thus, heavily indebted developed economies have to turn to a restrained fiscal policy, yet unlikely to serve as a fundamental solution to the debt challenge.

Developing nations also face the risks of such debt conundrum. A latest World Bank report said a second round of financial meltdown may strike a series of developing countries in Europe and Asia, many of which are confronting severe funding gap.

Moreover, no obvious price hikes have been observed across the world. Developed countries are only experiencing a moderate inflation due to a stagnant demand and oversupply of job seekers in the labor market. Emerging economies are not suffering high inflation, either.

Meanwhile, Morgan Stanley Capital International World Index began to decline since April while the S&P GSCI Commodity Index began to fall back from its May peak.

These drops indicate that the global market has not recovered its investment appetite and a stronger U.S. dollar as well as the gold fever shows that world's capital is inclined to stay away from possible risks.

High unemployment rates are also biting off the gains of the weak economic recovery.

In the United States, the May jobless rate stayed at 9.7 percent, and the private sector added a limited number of new jobs. In the euro zone, the jobless rate reached double digits in April, the highest since August 1998.

Apart from that, banks all over the world, except Canada, Australia, Brazil and India, have kept their benchmark interest rates at historically low levels. Lenders in Russia and parts of eastern Europe are lowering rates.

The International Monetary Fund warned over a year ago that the financial crisis would bring the world economy into uncharted waters.

As the prediction has unfortunately become true, both the G20 nations and the rest of the world have to be fully aware of these predicaments as they are managing to march along a bumpy road toward a tangible and steady economic recovery.

Editor:Xiong Qu |Source: Xinhua

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