Serious slowdown predicted for US economy
Updated: 2008-01-27 09:17
It is also unclear if lower interest rates will spur more lending, given the credit market meltdown, Thain said.
Strauss-Kahn said the priority now is to correct malfunctioning of financial markets and restore economic confidence.
In a rare occurrence, Strauss-Kahn advised those countries with low fiscal risks to resort to fiscal policies, in combination with monetary policy.
"At least the economies with low fiscal risks have to be prepared for fiscal policies," such as the US stimulus package of tax cuts, Strauss-Kahn said.
The IMF unusually encourages members to pursue fiscal consolidation and contain deficit level.
With a major downturn predicted for the US economy, the world's largest economy, the whole world was feared to be dragged down.
As to emerging economies, which were taken by some as a substitute support of the world economy, Strauss-Kahn said though they would largely perform well, it was unlikely for them to be immune from the US slowdown as their links with the US economy do exist.
However, Indian finance minister Palaniappan Chidambaram said the US slowdown, if not recession, would not have a major impact on his country, one of the emerging economies.
Chidambaram said that based on the present assessment, Indian economy would grow between 8 percent and 8.5 percent this year since investment and domestic consumption, the two leading drivers of the economy, would remain supportive.
In the case of India exports only rank as the third driver of the economy, which means India is not deeply dependent on the US market, he said.
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