IMF: Advanced economies face risk of falling back into recession

Advanced economies may fall back into recession if policymakers fail to rebuild market confidence and boost growth, warned the International Monetary Fund (IMF) on Friday. In a report presented to the G20 summit in Cannes, France last week but only published on Friday, the Washington-based global lender said that "recovery remains in low gear in major advanced economies with elevated risk of falling back into recession." "Policy paralysis and incoherence have contributed to exacerbating uncertainty, a loss of confidence, and heightened financial market stress," said the IMF. The 187-member international institution said that global economic environment "has become much more challenging" as growth in advanced countries has slowed sharply and financial stress has increased. The IMF called for "swift and decisive action" to secure the global recovery. "Major advanced economies urgently need to articulate credible medium-term fiscal plans and further financial sector reforms to resolve underlying problems and weaknesses that led to the crisis, " noted the IMF. "Key emerging surplus economies need to address impediments to rebalancing and allow greater exchange rate appreciation; and all need to focus on structural reform, including in the financial sector, aimed at alleviating key impediments to higher growth," it added. On the fiscal side, policy progress is slow, said the Fund. "There is now considerable uncertainty about how fiscal sustainability will be achieved in the United States, Japan, and some euro area economies," it said, adding that "these economies need to move quickly to put in place credible medium-term consolidation plans, which will help preserve room for adequate short-term fiscal support to the recovery." The G20 summit concluded last Friday in Cannes, France.