WASHINGTON (Reuters) - The world economy is still fragile but the recovery from the financial crisis has been significantly faster than the International Monetary Fund expected, the head of the institution said on Thursday.
In his first news conference of the year in Washington, IMF Managing Director Dominique Strauss-Kahn said the IMF would unveil more upbeat growth forecasts in an update of the fund’s World Economic Outlook later this month.
The IMF in October forecast global growth would resume and hit 3.1 percent in 2010 after contracting in 2009.
Advanced economies were still being propped up by government spending while private demand remained weak, making the recovery fragile, he said.
Strauss-Kahn said the world was in the midst of a jobs crisis, with the worst yet to come, as he urged governments to take the situation seriously and shift part of their 2010 stimulus packages toward supporting employment.
Governments -- and the IMF -- can not declare the crisis over until the employment crisis was under control, he said, adding: “It’s far from that.”
He urged a global focus in 2010 on reforming financial regulation in order to help prevent a repeat of the failures that caused the financial crisis.
Strauss-Kahn said financial sector regulations and oversight need to be stronger and smarter. Without needed changes, he said the financial sector could go back to business as usual and lessons from the crisis would be cast aside.
“It means we should complete the global project to address the failings in regulation, economic policy and governance that lay behind this crisis,” Strauss-Kahn said, adding that change needs to begin with the financial sector.
“The question is not to add layers of regulation one over the other one, but to have regulations that really help avoid crisis of this kind,” he said, noting that the changes would require political support.
The IMF chief applauded plans by the Obama administration to apply a levy against major U.S. financial institutions to cover the cost to taxpayers for bailing out troubled banks.
“I really celebrate this proposal by the U.S. government because it shows the political momentum to move in this direction is still there,” he said.