Is there a break in the clouds? Is the world economy on the road to recovery? Maybe, if the International Monetary and Finance Committee (IMFC), the steering panel of the International Monetary Fund, is to be believed.
“Carefully, cautiously, we can say there is a break in the clouds,” IMFC chairperson Youssef Boutros-Ghali was quoted by Reuters as saying on Saturday.
Is Boutros-Ghali being realistic about recovery or is he merely optimistic? For recovery by 2010, IMFC has called for restoring the health of banks, revival of lending and restarting global capital flows. All three goals are far from being realized.
If history is any guide, it will be a while before bank balance sheets can be cleaned up. As for lending, the game centres around expectations. These “animal spirits” are yet to be revived: Until gloomy news about companies and emerging market economies stops flowing, that will not happen. Until that date, international capital flows won’t resume. Recovery may still be some distance away.