If global imbalances in the world economy are not resolved properly, a worldwide recession could result, International Monetary Fund chief Rodrigo Rato was quoted as saying by a German paper today.
The United States' current account deficit is an imbalance of particular concern and the country needs to work on
boosting private saving and fiscal consolidation, Rato wrote in a guest contribution for business newspaper Boersen-Zeitung.
"The debate on these imbalances should be taken very seriously because a disorderly resolution of the problem could spark a global recession which we don't want," he wrote in an article to be published in the paper's Tuesday edition.
"However, adapting global demand in an orderly fashion is difficult and can't be achieved in a rush," he added.
Rato said that the flipside of the US deficit was the high current account surpluses being run by oil exporting countries, Japan, China and developing economies in Asia.
He said economies with current account deficits needed to reduce their dependence on global savings and countries with surpluses needed to lower their reliance on foreign demand.
He also urged implementing measures that would boost domestic demand and strengthen the influence of market forces in the allocation of resources in developing Asian countries.
Rato was writing ahead of a meeting of finance ministers from the Group of Seven industrialised nations and officials from the IMF and the World Bank in Singapore later this month.
Speaking in Calgary in Canada on Friday, Rato said the global economy was growing briskly but that the risks of a downturn had increased since April.
In his article Rato again underlined this point and raised others he expanded on in Canada, such as how upcoming multilateral discussions among officials from leading economies would focus on reducing global economic imbalances.
- REUTERS
