IMF chief economist: Appreciation of RMB no cure-all for US economy

• Source: Xinhua
• [10:25 February 16 2010]
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"At this stage of recovery, the US government has to balance deficit reduction against the need to sustain US growth. The US government will be reluctant to reduce its fiscal stimulus until private demand is strong enough to sustain growth," he said.

He added that an increase in US exports would make it easier for the US government to reduce the stimulus. "In this sense, what happens in the US and China is interlinked," Blanchard said.

The US government recently proposed a budget of 3.83 trillion dollars for the fiscal year 2011 with a forecast deficit of 1.56 trillion dollars in 2010, another new record of budget deficit. In 2009, the United States saw a record deficit of 1.41 trillion dollars.

As for the world economic trend, Blanchard said that the recession is ending and that the recovery is proceeding with emerging Asia countries recovering at a much faster pace than advanced countries elsewhere.

"The main challenge is to make sure that growth is sustained in advanced countries," he said.

"If it is not, then the rest of the world will suffer as well," he warned.