Global economy could recover as early as end of 2009, a former chief of the International Monetary Fund (IMF) told a business conference in Manila Tuesday.
But Michel Camdessus, former managing director of the IMF and an honorary governor of Banque de France, told audience attending the 7th Management Association of the Philippines in Makati City that monetary leaders need to meet several conditions to make sure the impact of the US financial crisis permeating around the world halts before 2009 ends.
He said that to kick-start the recovery of world economy, world leaders should "coordinate their actions well and start working to reform international credit markets."
He stressed that transparency, especially in how the financial markets did their business, is the key.
The domino effect of US financial crisis was set off by the pyramid-like tumbling of the subprime housing, which was the underlying basis of several exotic financial products that are unregulated.
"The unregulated housing market in the US was a mistake. This should have been prevented with rules that are much reasonable,” he told the audience. “Also, rules over off balance sheet activities of banks must be stricter... these should be monitored closely to prevent a similar thing from happening."
Camdessus said that it is only through this that confidence of investors in the debt markets can be restored, thus, allow companies to raise capital for more investments.
If world leaders could get their act together, he said the global economy this year could grow "at a rate more or less in the average of the last decade, at 3 percent."
Less exports, OFWs
The Philippines, like most Asian countries, feel the impact of the global financial crisis in the slowing growth of their export industries.
"If there is low level of export market activity, then you will export less. You (the Philippines) are an exporter of manpower. It is a problem for you because less jobs will be created due to the slowdown."
Camdessus said the region is not "decoupling" from a global downturn because markets are a lot--not less--interconnected now more than ever.
Since 2000, the region has cut loose from the US and diversified its markets as well as strengthened its intraregional ties.
Intra-regional trade among Asian countries accounted for about two-thirds of worldwide expansion, toppling the US as the main engine of growth.
Thus, Camdessus said he was optimistic that Asia will not go the way of the US and several European economies that have slipped to or about to face a recession.
He said Asia will still post constant--though slower--growth.