If there is one overriding theme that has dominated the spring meetings of the International Monetary Fund and World Bank that concluded Saturday in Washington, it is this: We’re not out of the woods yet.
While this is not a time of wrenching financial crisis as in 2008 and 2009, in every corner of the global economy, some sort of major challenge — or reckoning — is underway.
The United States has high unemployment and a yawning budget deficit that will need to be brought down over time. Europe is facing debt crises in several nations. Japan is seeking to rebuild after an earthquake, tsunami and nuclear emergency. The Middle East is undergoing a sweeping political transformation. Major emerging nations such as China, India and Brazil are grappling with high inflation spurred by overheating economies and rising food and fuel prices; and poorer nations, particularly in Africa, are bearing the brunt of the higher food prices.
“There are significant vulnerabilities still in the global financial and economic system,” said Tharman Shanmugaratnam, the finance minister of Singapore and chair of the IMF’s governing body. “That reflects the legacy of an international monetary system that is still not in what we consider satisfactory shape. On top of that, we have new vulnerabilities and new risk,” he said, mentioning the Middle East, Japan and higher commodity prices.
The IMF is trying to learn from the 2008 crisis and become better at understanding developing risks in the world economy, said a statement from leaders of the fund, which lends money to governments and aims to maintain stability in the world financial system.
“The recovery is underway, but unemployment in most countries is still too high,” said Dominique Strauss-Kahn, managing director of the IMF. “The downside risks are still there.”
In particular, financial leaders are only starting to understand the economic consequences — and causes — of the political upheaval that has already transformed Tunisia and Egypt and is driving conflict in Libya. The unrest has been caused in part by rising prices for food; over the past year, according to a World Bank report, the price of corn is up 74 percent and wheat is up 69 percent.
“This is the biggest threat today to the world’s poor,” said Robert Zoellick, president of the World Bank. “We risk losing a generation. We are one shock away from a full-blown crisis.”