Global economic recovery has started: IMF chief

WASHINGTON- The global economic recovery has begun but sustaining it will require refocusing the United States toward exports and Asia toward imports, the International Monetary Fund's chief economist said on Tuesday.

In an article released by the IMF, Olivier Blanchard also said potential economic output may be lower than it was before the financial crisis struck.

"The turnaround will not be simple," Blanchard said. "The crisis has left deep scars, which will affect both supply and demand for many years to come."

U.S. consumption, which accounts for about 70 percent of the U.S. economy and a large chunk of global demand, would not quickly return to pre-crisis strength as households cope with trillions of dollars in losses from the falling housing and stock markets.

He said the financial crisis had made Americans more conscious of "tail risks" -- events that are unlikely to occur but when they do have devastating consequences.

That means U.S. consumers are unlikely to return to their free-spending ways, and both the United States and its trading partners will have to adjust. Emerging Asian countries, especially China, must play a big role.

"From the point of view of the United States, a decrease in China's current account surplus would help increase demand and sustain the U.S. recovery," he said. "That would result in more U.S. imports which would help sustain world recovery."....more