Wait, world economy not out of the woods: IMF

Washington: Led by emerging market economies, especially in Asia, the global economy is recovering significantly faster than previously expected, but growth is still dependent in most advanced economies on government stimulus measures, the IMF has said.

Growth remains fragile in most advanced economies as recovery was still sluggish, with private demand weak and joblessness continuing to rise, International Monetary Fund Managing Director Dominique Strauss-Kahn told reporters Friday.

"We are not out of the woods until the private sector has recovered."

On the global economy, Strauss-Kahn said he expected to see countries around the world recovering at different speeds in the various regions.

He urged governments not to relax stimulus measures too early in the mistaken belief that a strong recovery had taken hold, and suggested that they could shift stimulus measures toward projects that would create additional jobs.

Breaking down what had happened during the past two years of crisis and looking ahead to 2010, he said this year must be a year of transformation, to complete the reshaping of the global financial and regulatory system.

Regulation and financial sector supervision needed to be not just stronger but smarter. The aim was not to impose additional layers of regulation, Strauss-Kahn said.

There was a risk, he said that momentum for reforming the financial sector could be lost and policymakers should not forget the roots of the crisis.

At the request of the Group of Twenty (G-20) industrialised and emerging market economies, including India, the IMF is scheduled to provide an assessment by April of options for how governments can get the financial sector to contribute to the costs of the crisis.

Outlining priorities for the Fund in 2010, Strauss-Kahn said the institution was looking into proposals for how to finance climate change measures. "We will provide ideas in the near future," he said.

In the coming year, the IMF would focus on delivering the economic regeneration that will drive growth in this new decade.