10 October 2001, 14:08  IMF's Koehler sees slight recession in Japan, EU, US in H2

HELSINKI (AFX) - Horst Koehler, managing director of the International Monetary Fund, said Japan, Europe and the United States possibly face a slight recession in the second half of this year. There is a need to boost confidence in the good fundamentals of the world's economy, he said at a news conference. In Europe, in "the third quarter and fourth quarter, they will not see strong growth. For Germany and other countries, it may happen there is a slight contraction or a flat quarter," Kohler said. He added, however: "We should not overlook, behind of this, the strong fundamentals of the European economy." Koehler commended Japanese Prime Minister Junichiro Koizumi's willingness to clean up the non-performing loans of the Japanese banks, but confirmed that the country's economy is contracting this year. "In Japan, there will be a recession, of the magnitude of possibly between a half and one percentage point (of GDP) this year," he said. "In the United States, after the flat development in the third or fourth quarter, possibly even with a slight retraction, we will see a recovery, (at the) latest in the second quarter next year," he said. "The issue now is how to respond to this huge level of uncertainty, how to build up or restore confidence," which cannot be done just with short-term spending or even short-term easing of monetary policy, Koehler said.

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