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Monday, 18 May 2009

Zoellick sees return to growth

WARSAW - THE global economy may return to growth in late 2009 or in 2010, World Bank President Robert Zoellick said on Monday, and European banking officials also saw tentative signs the financial crisis could be easing.

In Asia, credit rating agency Moody's stripped Japan of its AAA rating on its foreign currency debt, but manufacturing and consumer sentiment edged up, keeping alive hopes the storm hitting the world's No. 2 economy might be abating.

European stock markets followed Asia higher and Wall Street was forecast to rise, too, following better-than-expected earnings from US home improvement chain Lowe's.

The standout market was India where the 30-share BSE index jumped more than 17 per cent, the biggest single-day gain in almost two decades, after the ruling coalition secured a decisive election victory.

Mr Zoellick, speaking during a trip to Warsaw, said the pace of decline in the global economy was set to slow. 'The question is when we will return to growth in the global system and that could be late 2009 or 2010. I don't think this will be 2011,' he said.

Last week, Mr Zoellick stressed the high degree of uncertainty still colouring the outlook for the global economy. Once-booming Central and eastern Europe have been particularly hard hit by investors fleeing riskier emerging markets. The crisis could have an impact on short-term foreign direct investment in the emerging world, he said.

Many economists and policymakers are cautiously optimistic that sharp interest rate cuts, fiscal packages and bank bailouts will eventually succeed and that the world has probably seen the worst of the deepest recession since World War Two.

European Central Bank policymaker Axel Weber said he believed the bank's efforts to boost the eurozone economy were sufficient. 'Unless things get noticeably worse, in my view, the package of measures decided until now is sufficient,' Weber, who also heads Germany's Bundesbank, told the Financial Times Deutschland.

The euro zone's trade balance swung into a surplus in March from deficits the previous month and a year earlier as exports dipped marginally more slowly than imports, data showed. The unadjusted external trade surplus of the 16 countries using the euro came to 400 million euros (S$790.8 million) against deficits of 1 billion euros in February and 2.3 billion in March 2008, the European Union's statistics office said.

Adjusted for seasonal swings, the euro zone still had a 2.1 billion euro trade deficit in March, but that gap was smaller than February's 2.9 billion euros and January's 6.6 billion shortfall. -- REUTERS

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