core sector communique

IMF Managing Director Dominique Strauss-Kahn, in Singapore, Calls for the Right Kind of Global Recovery, with a Greater Role for Asia

Press Release No. 11/23
February 1, 2011

Mr. Dominique Strauss-Kahn, Managing Director of the International Monetary Fund (IMF), visited Singapore on February 1 and met with Prime Minister Lee and Finance Minister Shanmugaratnam. The Managing Director commended Singapore for its impressive policy response during the recent global crisis, which has helped underpin a rapid recovery in Singapore.

Speaking at a public event organized by the Monetary Authority of Singapore, Mr. Strauss-Kahn called for a new approach to economic management in the wake of the crisis. “In my view, we will only get the recovery right if we take holistic approach to managing the economy—one that focuses not only on standard macroeconomic and financial policies, but also on job creation and social protection.” In this regard, he noted that Asia, as one of the “leading economic regions of the world” will play an essential role in finding the global policy solutions needed to achieve this goal.

Mr. Strauss-Kahn said that looking more closely at the global economy, the pre-crisis pattern of global imbalances is re-emerging. While growth in economies with large external deficits is still being driven by domestic demand, growth in economies with large external surpluses is still being powered by exports.

Turning to policies that would help re-balance the economic recovery, Mr. Strauss-Kahn said that in advanced economies, the key is to promote growth and job creation. Emerging economies had weathered the crisis well but there are risks of overheating, and even a hard landing. Macroeconomic policies need to be tightened and recent rate actions “were the right decision—though more may be needed.” He noted that emerging economies with large surpluses need to diversify the drivers of growth. “Exchange rate adjustment will obviously have to play an important role—which is why it should not be resisted” he said.

Turning next to “internal imbalances” straining the global recovery, the Managing Director said that “without jobs and income security, there can be no rebound in domestic demand—and ultimately no sustainable recovery.” Noting that 400 million young people are expected to join the global labor force over the next decade, he warned of a prospect of a “lost generation of young people.”

Mr. Strauss-Kahn explained that historic governance reforms at the IMF, including increasing Asia’s weight, are changing the way countries work together. “We look forward to continuing our vital partnership with Asia in this new, 21^st century IMF.”