Recovery a long way off, IMF chief says

The present economic crisis remains ’far from over’ and fresh bank bailouts are needed, the head of the IMF warned yesterday.

Dominique Strauss-Kahn added that there were currently conflicting signals - ’red lights and green lights’ - on the financial climate.

Some analysts have pointed to recent improvements on several economic indicators a rally in stock markets as evidence that the economic downturn is beginning to alleviate.

However, the IMF maintained a gloomy outlook in its latest batch of economic forecasts earlier this week, suggesting that the credit crunch-induced recession would see global output contract by 1.3 per cent in 2009.

Its prognosis for the UK was a 4.1 per cent decline - worse even than the government’s latest prediction of a 3.5 per cent drop in national output.

Toxic assets on banks’ balance sheets were cited as a major factor behind the continuing malaise by Mr Strauss-Kahn.

He said: ’Our belief is the crisis is far from over. We have long months of economic stress in front of us.

’You never recover before you complete the cleaning-up of the balance sheet of the financial sector … Already a lot has been done, but not enough, not enough in old advanced economies.’ADNFCR-2318-ID-19138291-ADNFCR