BASEL, Switzerland - Emerging improvements in the global economy are likely to result in further growth, but the extent of the recovery remains uncertain, the Bank for international Settlements said in its latest annual report, published Monday.
"General pessimism about the imminence of a worldwide slump or financial crisis is . . . unwarranted," wrote Alexandre Lamfalussy, general manager of the settlements bank. "What, however, is much less predictable is the pace, shape, and breadth of recovery."
Mr. Lamfalussy noted that there was reason for optimism, with signs emerging that the United States is moving out of recession and that fundamentals are improving.
Debt Ratios Seen Improving
He said positive signs were the improving debt-service ratios of households and corporations in industrial countries, the external-debt situation of major developing countries, and the inflation outlook on a global scale.
Attempts by many major nations to reduce their large budget deficits make it clear that "fiscal policy will not be available on a global scale to provide any sizable stimulus to growth," Mr. Lamfalussy said, adding that "it would be unwise to use monetary policy indiscrimately for this purpose."
Monetary leaders have been slow to recognize the forces that dampened global economic growth last year, said Bengt Dennis, president of the settlements bank. They should adapt themselves to changes in the financial world, he said.
Policymakers, including central bankers, share part of the burden for the duration and pervasiveness of the economic weakness, and for the still-too-high rate of inflation in the industrialized world, said Mr. Dennis, who also heads the Swedish central bank.
"We may have been too complacent about our policy successes during the past decade. as we focused on our relatively good inflation and growth performances, we were slow to realize that imbalances were building up in some financial sectors," Mr. Dennis said in a speech prepared for the 62d annual general meeting of the BIS Monday.
He referred to the steep fall in prices of several classes of assets, especially real estate, combined with relatively high debt burdens, as major causes of the economic difficulties.
A "key factor" holding up the recovery in several countries was "the need for a restructuring of household and corporate balance sheets," he said.
The BIS annual report added, however, that the apparent lack of significant international cooperation last year and at the beginning of this year does not seem to imply the demise of global economic coordination.
But the report said that jointly stated goals seemed to clash with several short-term economic realities.
"Central bank assessments of the advantages of different approaches to monetary policy have clearly begun to diverge," the report said.